“Save our Homes” and the Portability of the “Save our Homes” Exempt Value
One of the benefits of owning a primary residence in Florida is a Florida Constitutional right of Homestead. In addition to homesteaded property being protected from certain judgement creditors, owners of homestead property are eligible to apply for a Homestead Exemption on their property taxes. This exemption essentially provides the owner with a reduction of up to $50,000.00 on the assessed value of their primary residence, thus lowering their property taxes. A lesser known benefit of properties with a Homestead Exemption originates from an amendment made to the Florida Constitution in 1992. That amendment, generally known as the Save our Homes Exemption, limits increases on assessed values for properties with a Homestead Exemption, and as a result, limits the affect that drastic escalation in property values has on property taxes payable on homestead property. Before the Save our Homes Exemption, as values of property would drastically increase, so would the applicable property tax. This amendment was established to prevent people (particularly long term residents) from having to sell their homes because they could no longer afford real estate taxes due to appreciation on their property. Generally speaking, the Save our Homes Exemption goes into effect the year following the granting of the Homestead Exemption. Thereafter, the maximum increase in an assessed value of a homesteaded property is limited to the lesser of the consumer price index or 3% per annum. This limit is known as the Save Our Homes Cap. Since property taxes are based upon assessed value (rather than market value), the limit on the assessed value increases due to the Save Our Homes Cap essentially results in a limit on property tax increases for the duration that a property is the homestead of the existing property owner. In an appreciating market, the gap between an assessed value (limited by the Save Our Homes Cap) and the market value can become significant over time and that gap is referred to as the Save Our Homes Exempt Value. Approximately sixteen years after the initial amendment creating the Save Our Homes Exemption, another amendment to the Florida Constitution known as Amendment One made the Save Our Homes Exempt Value of a homestead property portable. This amendment proposed to address an unforeseen consequence of the Save Our Homes Exemption: Many long-time residents felt trapped in their current home due to the fact that they would lose the benefit of their Save our Homes Capped value if they were to sell their home and buy a new residence. Amendment One essentially provides that a portion or even all of a homestead’s Save Our Homes Exempt Value (essentially the difference between the market value and assessed value due to the Save Our Homes Cap) can be transferred from an existing homestead to a new homestead. For planning purposes, parties should note that Amendment One limits the portability amount of the Save Our Homes Exempt Value to no more than 500,000.00, or in the case of a downsizing by a proportional calculation (again not to exceed $500,000). Should you have any questions on “Save our Homes” and its portability, please don’t hesitate to call the office at (239) 325-4070 or email firstname.lastname@example.org.