Section 193.155 of the Florida Statues pertains to the assessment of homestead property.
Subsection (3) provides that following a change in ownership of a homestead property previously
protected by a three percent per year cap on any increase to its assessed value for property tax
purposes, the property is to be reassessed at its just value. However, subject to certain limits
and procedures discussed below, subsection (8) allows for the transfer to a person’s new homestead of the assessment cap associated with the person’s prior homestead.
Under ordinary circumstances, where the same person or persons who received a homestead exemption with respect to a prior homestead qualify for a homestead exemption with respect to a new homestead, without adding or subtracting any other person qualified for a homestead exemption, subsection (8) provides separate calculations for determining the assessed value of the new homestead based on whether the just value of the new homestead is greater than or equal to the just value of the prior homestead or is less than the just value of the prior homestead.
If the just value of the new homestead is greater than or equal to the just value of the prior homestead, i.e., if the property owners are “upsizing,” the first step is to determine the assessment cap of the prior homestead. This is calculated by subtracting the assessed value of the prior homestead from the just value of the prior homestead as of January 1 of the year in which the prior homestead was abandoned. If this assessment cap is less than $500,000, then the assessed value of the new homestead is calculated by subtracting the assessment cap value from the just value of the new homestead. If the assessment cap is greater than or equal to $500,000, then the assessed value of the new homestead is calculated by subtracting $500,000 from the just value of the new homestead. Thus, the assessed value of the new homestead cannot be more than $500,000 below its just value.
Example No. 1 – A person sells a homestead with a just value of $1,000,000 but with an assessed value of $750,000, and establishes a new homestead with a just value of $2,000,000. The assessment cap of the prior homestead is $250,000 (calculated as $1,000,000 - $750,000), which is less than $500,000. Therefore, the assessed value of the new homestead will be $1,750,000 (calculated as $2,000,000 - $250,000).
Example No. 2 – A person sells a homestead with a just value of $1,000,000 but with an assessed value of $400,000, and establishes a new homestead with a just value of $2,000,000. The assessment cap of the prior homestead is $600,000 (calculated as $1,000,000 - $400,000), which is greater than $500,000. Therefore, the assessed value of the new homestead will be $1,500,000 (calculated as $2,000,000 - $500,000).
If the just value of the new homestead is less than the just value of the prior homestead, i.e., if the property owners are “downsizing,” the first step is to calculate the ratio of the assessed value of the prior homestead to the just value of the prior homestead as of January 1 of the year in which the prior homestead was abandoned. This ratio constitutes the fraction of the just value of the prior homestead that was actually assessed for property tax purposes, after taking into consideration the property tax protection provided by the three percent annual assessment increase cap. The assessed value of the new homestead is then calculated by multiplying this ratio by the just value of the new homestead, meaning that a person will still be assessed at the same fraction of just value with respect to the person’s new homestead as the person was assessed with respect to the person’s prior homestead. However, the assessed value of the new homestead again cannot be more than $500,000 below its just value. If the calculation described above yields such a result, then the assessed value of the new homestead is increased until it equals $500,000 less than its just value.
Example No. 3 – A person sells a homestead with a just value of $2,000,000 but with an assessed value of $1,500,000, and establishes a new homestead with a just value of $1,000,000. The ratio of the assessed value of the prior homestead to the just value of the prior homestead is 3/4 (calculated as $1,500,000 / $2,000,000). Therefore, the assessed value of the new homestead will be $750,000 (calculated as $1,000,000 x (3/4)).
Example No. 4 – A person sells a homestead with a just value of $2,000,000 but with an assessed value of $1,000,000, and establishes a new homestead with a just value of $1,500,000. The ratio of the assessed value of the prior homestead to the just value of the prior homestead is 1/2 (calculated as $1,000,000 / $2,000,000). Multiplying this ratio by the just value of the new homestead gives a value of $750,000 (calculated as $1,500,000 x (1/2)), which is more than $500,000 less than the just value. Therefore, the assessed value of the new homestead will be $1,000,000 (calculated as $1,500,000 - $500,000).
Subsection (8) also provides rules for “splitting,” where persons who shared a prior homestead establish separate new homesteads, and “joining,” where persons who owned separate prior homesteads establish the same shared new homestead. Under the “splitting” scenario, a person cannot reduce the just value of that person’s new homestead by more than that person’s proportionate share of the assessment cap of the prior homestead, in accordance with the person’s ownership interest in the prior homestead. For example, if two persons each previously owned a one-half interest in a shared prior homestead and then each established a separate new homestead, each person would only be able to reduce the just value of that person’s new homestead by one-half of the amount of the assessment cap associated with the shared prior homestead. Moreover, no more than a total of $500,000 can be transferred from the prior homestead for the combined reductions in just value of all of the separate new homesteads. Under the “joining” scenario, again no more than a $500,000 reduction in the just value of the new homestead can be transferred from the prior homesteads. Moreover, the just value of the new homestead cannot be reduced by more than the value of whichever of the assessment caps associated with the separate prior homesteads represented the greatest amount.
There are several general considerations of note arising out of subsection (8) and the Florida Department of Revenue’s rules in response thereto. First, for a person establishing a new homestead to qualify for portability, the person must have received a homestead exemption with respect to the person’s prior homestead as of January 1 of either of the previous two years. Second, for the new homestead to be qualified for the portability allowance, the prior homestead must subsequently be subject to reassessment at its just value. In other words, the homestead exemption and the assessment increase cap applicable to the prior homestead must be abandoned in order for the reduction in just value to be transferable to the new homestead. This prevents the scenario where, for example, multiple persons claim an exemption on the same homestead and then one such person relocates and attempts to establish a new homestead without the remaining persons abandoning the prior homestead. Transfer to the relocating person’s new homestead of the assessment cap associated with the prior homestead would not be allowed unless the prior homestead was abandoned by the other owners as well. Third, along those same lines, a person can abandon a homestead even though it remains the person’s primary residence, for the purposes of receiving a reduction in the just value of some other homestead.
The procedure for applying for portability is relatively straightforward. It involves ompleting a separate form provided by the Department of Revenue and filing it with the county property appraiser as an attachment to the homestead exemption application, which is due March 1 of each year. Thus, a person establishing a new homestead and seeking to transfer the prior homestead’s assessment cap to the new homestead must complete an application for homestead exemption with respect to the new homestead and attach the portability form to it. A person who misses the March 1 filing deadline for the portability form can file a petition to the county’s value adjustment board up to 25 days after notice of the person’s property tax assessment, and may be granted portability upon a showing of particular extenuating circumstances. Otherwise, the person can file for portability in a subsequent year, and the assessment reduction will be applied from that point forward, with no refund for the previous year or years.