The 1994 Save Our Homes Amendment to the Florida Constitution allows residents to homestead a single primary residence. This limits the property's taxable value to increasing at the lesser of 3% or the Consumer Price Index (CPI). Home prices in Florida have historically increased more than 3% annually. This creates a gap between the Market Value (what the county values the property at) and the Assessed Value (the amount that taxes are paid on).
In 2008, Florida changed its law to allow homestead portability. A homesteaded person can now move the difference in the Market Value and the Assessed Value to a new home. A maximum of $500,000 of homestead portability may be moved, or ported, to a new home (once per year limit). The new primary residence can be previously owned or must be purchased in Florida within 2 January 1sts of the homesteaded residence's date of sale.
To calculate the amount of homestead portability on a home being sold:
1. Go to http://www.pbcgov.com/papa/
2. Search by Owner, Address, or Parcel Control Number.
3. Click on the desired property to open the detailed listing.
4. Scroll to the bottom of the page where you will see “Appraisals” and “Assessed and Taxable Values”
5. In this example:
Market Value $300,112
(Assessed Value) ($183,109)
Most county property appraiser offices keep the Market Values low to avoid a large volume of appeals each year. The house in this example will most likely sell around $500,000 where the county has a Market Value of $300,112. If the market value was increased to $500,000 through the Value Adjustment Board petition process, the portability amount should be almost $200,000 more. Most of Palm Beach County property tax rates vary between 1.5% and 2%, so that is a potential to gain tax savings of $3,000 to $4,000 per year! This savings will remain in place every year the individual owns a homesteaded house in Florida.
To maximize the homestead portability the county's Market Value can be raised in a Value Adjustment Board hearing. In Palm Beach County, the property seller, or their agent, must file a petition before September 16th. The filing fee is only $15. The seller must have written approval from the purchaser to represent the property in the Value Adjustment Board hearing because the actual hearing is the year following the sale.
It should be noted that in most cases, increasing the Market Value of the home does not affect the new purchaser's taxes. The purchaser's new Market Value for tax purposes is based on the amount they paid for the property. In rare decreasing home value markets, the process can cost the new buyer additional income taxes for the first partial year of occupancy. The seller can agree to pay the difference for the partial year affecting the new buyer. This way the seller still receives the tax benefit every year they own a primary residence in Florida. That is why it is a good idea to consult with an experienced Financial Planner familiar with this process before the sale of a primary residence.
To petition the Value Adjustment Board for a market value increase:
1. Go to https://myvab.mypalmbeachclerk.com/2016/
2. Select “File a new petition” and fill out the online form and desired hearing date.
3. Have a Current Market Analysis (CMA) completed by a realtor or have an Appraisal completed
by a licensed property appraiser prior to the hearing date. Both CMAs and appraisals must be
completed with a date as of January 1st the year of sale, not the sale date.
4. Present a copy of the CMA or Appraisal to the property appraiser's office a minimum of 15
days prior to the hearing.