When you declare a home as your primary residence, you’re eligible for a homestead tax exemption in most states. While varying state by state, generally, declaring your primary residence as your homestead means you only pay property taxes on a value lower than the appraised value of your home. Your home is then protected from creditors in the event of a spouse death or bankruptcy. Some states automatically apply a homestead exemption, while others require that you file for it.
When you sell your current home or change primary residences, you’re eligible to transfer your benefit (accrued property tax savings) from one property to another. You must check your state’s regulations for exact values, but usually this allows you to lower the assessed value on your new residence.
Florida Homestead Portability:
In 1992, Florida enacted the “Save Our Homes” (SOH) Constitutional Amendment. This limits the annual increase in assessed property value to no more than 3%, or the Consumer Price Index for the previous year.
According to the Florida Department of Revenue, “If you are moving from a previous Florida homestead to a new homestead in Florida, you may be able to transfer, or “port,” all or part of your homestead assessment difference. If you’re eligible, portability allows most Florida homestead owners to transfer their SOH benefit from their old homestead to a new homestead. This lowers the tax assessment and, consequently, the taxes for the new homestead.
- “To transfer the SOH benefit, you must establish a homestead exemption for the new home within two years of January 1 of the year you abandoned the old homestead (not two years after the sale).”
- “You must file the Transfer of Homestead Assessment Difference (Form DR-501T) with the homestead exemption application. The deadline to file these forms is March 1.”
- “Complete all the forms and applications required for the exemption and file them with your county property appraiser. If the property appraiser denies your application, you may file a petition with the county’s value adjustment board.”
Homestead portability is a misunderstood benefit. It applies to many homeowners that are either upgrading or downgrading residences. Are you purchasing a new home as your primary residence? If you want to learn about homestead portability in your area, reach out to a mortgage expert or property appraiser.