Florida real estate attorneys and agents can be the bearers of great news to their closing clients by making them aware of the substantial savings associated with Florida’s Homestead Laws. These exemptions were originally put in place to encourage out-of-staters to relocate to Florida and also to protect local property owners from a volatile real estate market.
By helping clients understand the benefits of Florida’s Homestead laws and administration process, real estate professionals bring added value to their service. Whether the client is an incoming new resident, or a local homeowner in the process of upsizing, homesteading primarily adds a very real tax dollar advantage when availed.
1. The “Save Our Home” exemption caps taxes at 3% every year
In 1992 the Florida constitution was amended, including a provision that limited increasing taxation in direct proportion to increasing assessed appraisal values of properties. This exemption stipulates that a home’s value cannot increase by more than 3% per year, or the rate of inflation as determined by the Consumer Price Index if less than 3% per year. To take advantage of the exemption, the homeowner must apply for it at their county property appraiser’s office. For example, if the market value of a $920,000 home increased by 15% during a good real estate year, such as last year, instead of being taxed on a $1.06 million appraisal valuation, the homesteader would not be taxed on more than a $947,600 valuation.
2. Portability carries savings over to a homeowner’s future purchase
Homesteading your property carries another key advantage. In 2007, as a result of the housing crises of 2006 and the downturn in the economy, the addition of a “portability” rule was added to Save Our Homes legislation and made available to Florida real estate owners that had homesteaded properties. Prior to that, if a homeowner sold a homesteaded property and purchased a new home in Florida, the Save Our Homes assessed value would then returned to market value the year following the sale. However, with the new Portability rule, the non-taxed property value increase can be carried over to the new home. In practical terms, upon closing on a new home, the buyer stood to lose his or her homestead exemption for the first year on the new home, and, as evidenced by the recent robust real estate market, without the portability provision, their property taxes could double or triple.
3. Additional $50,000 Exemption for Seniors
While many Florida residents are looking forward to the special homestead exemption available to them when they turn sixty-five, incoming real estate purchasers looking to buy their retirement dream home in the Sunshine State may be pleasantly surprised to discover that, as senior citizens, they can receive a $50,000 homestead exemption. Again, to receive the exemption, an application must be submitted to their county property appraiser’s office. The benefit (Florida Statute 196.075) does put reported income restrictions on the retired individual. Year 2023’s adjusted gross income requirement stipulates that the retired individual’s reported income cannot exceed $35,167.
4. Protection from Seizure by Creditors
Another aspect of the homestead exemption offers Florida homeowners powerful protection of their real estate assets. A homesteaded property cannot be seized by creditors if you own money on a judgement. To qualify for this exemption, there is no limit on property value, but there is a limit on the size of the land on which the homestead is situated. If the home is located within city limits, the seizure protection applies to lots of up to half an acre. However, a bankruptcy can override the projection if the homeowner files for bankruptcy shortly after purchasing the property.
A note of caution regarding Devise of Homestead
While real estate lawyers who commonly deal with wills, trusts and division of assets of a deceased homeowner’s estate will be knowledgeable of, and advise their clients on, devise of homestead rules, it would be prudent for any Florida real estate professional to be aware of the pros and cons of the legislation and share its provisions with their client. It would be especially important to senior clients where distribution of assets to their children is a common concern.
Basically, devise of homestead governs property ownership after the homestead’s owner has passed away. While a homeowner can affect the devise of his or her homesteaded property in a will, there are certain restrictions required by law that apply. For example, if the individual penning the will is the sole owner, and does not have an inheriting spouse or children, that homeowner is free to divise the property as he or she sees fit. However, this cannot be done if there is a surviving spouse and/or surviving children involved.
In the absence of alternate estate planning correctly addressing devisement concerns, Florida law stipulates that the property will be devised according to Florida’s intestacy rules. The rules determine that the surviving spouse and children will inherit the homestead property, and more specifically, the spouse will receive a life estate in the homestead property and the children will receive a vested remainder. It goes without saying that an ironclad will and solid estate planning, homeowners can avoid potential conflicts between descendants over homesteaded property issues.
Orchestrating the best-case legal scenario to close on a house
While basic homesteading is common knowledge among most Floridians and the application procedure doesn’t typically require a Florida lawyer, out-of-state home buyers may not be aware of the special exemptions unique to Florida. Additionally, because there are real estate law nuances and benefits to the homestead laws that go beyond the discounted annual property tax valuation, even seasoned Florida property owners may not be aware of the provisions of the legislation in its entirely. Any professional assisting in a Florida real estate deal would be well advised to bone up on the Homestead provision (Florida Statute 193.155).
When a home purchase or sale is imminent, your smartest move may be to select an exceptional closing lawyer. Florida Bar Board-Certified in Real Law, attorneys David E. Klein, Esq. and Guy Rabideau at Rabideauklein.com have the expertise and experience needed to effectively advise on any Florida property matter. Their goal is to protect their clients’ interests throughout any Florida real estate transaction no matter how complex or difficult, all the while ensuring a smooth, stress-free experience for all parties concerned. You are welcome to contact Rabideau Klein to assist with your upcoming closing.