If you've owned your Florida home for several years, you may have a valuable tax benefit you can take with you when you move.
Thanks to Florida's Save Our Homes law, the taxable value of your home may be much lower than its market value. That difference can often be transferred to another Florida home through homestead portability, potentially reducing your future property taxes.
Before we explain portability, it's important to understand how Florida calculates your property's value for tax purposes.
Understanding Market Value and Assessed Value
Your county property appraiser assigns several values to your property for tax purposes.
The market value, which may also be shown as the just value, is the property appraiser’s estimate of what your home was worth as of January 1 of that tax year.
The assessed value is the value used before exemptions are subtracted. For homeowners with a Florida homestead exemption, the assessed value may be lower than the market value because of the Save Our Homes assessment limitation.
Your taxable value is generally the assessed value after applicable exemptions are deducted. Property taxes are then calculated using the taxable value, local millage rates and any applicable assessments.
How Much Can the Assessed Value Increase Each Year?
Once a property receives the Florida homestead exemption, the Save Our Homes law limits its annual assessed-value increase to the lesser of:
- 3% of the previous year’s assessed value, or
- The percentage change in the Consumer Price Index.
When inflation is below 3%, the lower Consumer Price Index percentage applies. When inflation is higher than 3%, the increase remains limited to 3%.
For example, suppose your home has an assessed value of $300,000. If the full 3% cap applies, the assessed value could increase by as much as $9,000 the following year.
However, if the applicable Consumer Price Index change is only 2%, the increase would be limited to approximately $6,000 instead.
This cap applies to the property’s assessed value, not necessarily its market value. Your home’s market value could rise significantly while its assessed value increases much more slowly.
Your Property Tax Bill Is Not Capped at 3%
A common misconception is that a homesteaded homeowner’s total property tax bill cannot increase by more than 3% per year.
The Save Our Homes cap only applies to the assessed value of the homestead. Your actual tax bill may increase by more than 3% if local taxing authorities change their millage rates, new assessments are added or certain improvements are made to the property.
Additions and improvements, such as a new room or pool, may also be assessed separately at market value rather than being completely protected by the existing Save Our Homes cap.
How the Save Our Homes Benefit Develops
Over time, the annual assessment limitation can create a growing difference between your home’s market value and assessed value.
That difference is commonly known as your Save Our Homes benefit or homestead assessment difference.
For example, suppose your county property appraiser shows:
Market value: $575,000
Assessed value: $365,000
The estimated Save Our Homes benefit would be:
$575,000 minus $365,000 equals $210,000.
This does not mean the homeowner receives a $210,000 cash benefit or a $210,000 reduction in taxes. It means approximately $210,000 of the property’s market value is not currently included in its assessed value because of the Save Our Homes limitation.
When that homeowner moves to another qualifying Florida homestead, some or all of that assessment difference may be transferable through portability.
What Is Florida Homestead Portability?
Homestead portability allows an eligible Florida homeowner to transfer up to $500,000 of the Save Our Homes assessment difference from a previous Florida homestead to a new Florida homestead.
Portability does not transfer the homestead exemption itself. You must apply for a new homestead exemption on the new property and request that the previous assessment difference be transferred.
The benefit reduces the assessed value of the new home. It does not reduce the purchase price, mortgage balance or actual market value of the property.
How to Estimate Your Portability Benefit
Homeowners can usually obtain a quick estimate by searching for their current property on their county property appraiser’s website.
Search for your address and locate the property’s valuation information. The exact wording varies by county, but you will generally be looking for:
- Market value or just value
- Assessed value
Subtract the assessed value from the market value:
Market value minus assessed value equals estimated portability benefit.
For example:
Market value: $600,000
Assessed value: $350,000
Estimated portability benefit: $250,000
The property appraiser will make the official calculation, so this should only be treated as an estimate. Ownership changes, previous portability, improvements, multiple owners and other circumstances can affect the final amount.
Homeowners in Sarasota County can visit the Sarasota County Property Appraiser’s website, select the real property search option and enter their address or owner’s name. The property record should display the home’s market value, assessed value and exemption information.
What Happens When You Buy a More Expensive Home?
When the market value of the new homestead is equal to or greater than the market value of the previous homestead, the homeowner can generally transfer the full Save Our Homes assessment difference, up to the $500,000 maximum.
Suppose your previous home has:
Market value: $400,000
Assessed value: $200,000
Estimated portability benefit: $200,000
You then purchase a new Florida home with a market value of $650,000.
After applying the estimated $200,000 portability benefit, the new home’s assessed value could begin at approximately $450,000 before applicable exemptions are considered.
The calculation would be:
$650,000 minus $200,000 equals $450,000.
Instead of beginning with an assessed value of approximately $650,000, the new homestead could begin closer to $450,000, subject to the property appraiser’s official valuation and calculation.
What Happens When You Buy a Less Expensive Home?
When the new home has a lower market value than the previous home, the homeowner generally cannot transfer the entire assessment difference.
Florida uses a proportional calculation based on the relationship between the previous home’s market value and assessed value.
For example, suppose your previous home has:
Market value: $800,000
Assessed value: $500,000
Save Our Homes assessment difference: $300,000
If your new home has a market value of $500,000, the property appraiser will calculate a proportional portability amount. It would not necessarily be the full $300,000.
You do not need to calculate this yourself when applying. The county property appraiser will determine the official amount.
Who May Qualify for Portability?
To qualify, you generally must have received a Florida homestead exemption on your previous residence and establish another qualifying Florida property as your permanent residence.
The portability benefit may be transferred between Florida counties. Your previous home and new home do not have to be located in the same county.
You must establish the homestead exemption on the new residence within the applicable three-assessment-year period after abandoning the previous homestead.
There is generally no requirement that the previous home be sold, but it must be abandoned as the homestead by all applicable homestead owners before its assessment difference can be transferred.
Joint ownership, marriage, divorce, trusts and changes in ownership can make the calculation more complicated. Homeowners in these situations should speak directly with the property appraiser’s exemption department.
How and When to Apply
Portability is not automatic.
When applying for the homestead exemption on your new home, you should also complete the portability application, commonly known as Form DR-501T.
For a timely application, homeowners generally must own and occupy the new property as their permanent residence as of January 1 and apply for the homestead exemption and portability by March 1 of that year.
For example, if you purchase and occupy a home after January 1, you would generally apply for the homestead exemption and portability for the following tax year.
Late applications may sometimes be considered under limited circumstances, but homeowners should not rely on receiving an exception. Contact the county property appraiser as early as possible to confirm the requirements and deadlines.
Why Buyers Should Estimate Portability Before Moving
Portability can make a major difference in the ongoing cost of a new home.
Two buyers could purchase similar homes for the same price but receive very different property tax bills. One buyer may bring a large portability benefit from a previous Florida homestead, while another may be purchasing a first home or moving from outside Florida without any portability.
This is why buyers should not assume that the seller’s current tax bill will remain the same after closing.
A seller may have owned and homesteaded the property for many years, resulting in an assessed value well below market value. Following a sale, the property may be reassessed based on its market value, subject to any portability and exemptions available to the new owner.
Before purchasing, buyers should estimate taxes using the expected purchase price, their likely exemptions and any available portability benefit.
Final Thoughts
Florida homestead portability begins with the Save Our Homes assessment limitation.
The annual limitation allows a homesteaded property’s assessed value to increase by no more than the lesser of 3% or the applicable Consumer Price Index change. Over time, this can create a significant difference between the home’s market value and assessed value.
That difference may become a valuable portability benefit when the homeowner moves to another Florida homestead.
To get a quick estimate, you can contact the Ram-Z Home Team anytime, or search for your current home on your county property appraiser’s website and subtract the assessed value from the market or just value. Then contact the property appraiser to verify the amount, eligibility, filing requirements and deadlines.
Portability rules can vary depending on ownership and timing, so homeowners should always confirm their individual circumstances with the appropriate county property appraiser before relying on an estimated tax benefit.
