Monday, February 04, 2008

Portability.... Some Questions....

Questions about 'Portability' in Florida Real Estate Taxes

With the approval of the property tax reform on January 29, many homeowners saw a new window of opportunity. Specially ‘empty nesters’ living in large homes hoped to be able to downgrade and move to smaller places; or the opposite: new ‘up and comers’ prevented from moving to better homes by the fear of very large increases in their tax bills will have a great incentive now.

How will this ‘portability’ work?
There are two elements to be considered in a typical “save-our-homes” tax bill:
The just value or market value,
and the assessed value, which is reached after calculating the maximum yearly increase of 3% since the homesteaded property was purchased.
The ‘portability’ amount is the tax advantage that a ‘save-our-home’ beneficiary can ‘transport’ when moving to a new home, up to a maximum of $ 500,000. It is equivalent to the difference between the just value and the assessed value.
So far so good, but…
A lawsuit has been filed in state court, by a group of citizens who want to overturn the whole ‘save-our-homes’ amendment. They are now saying that they will possibly include the new ‘portability’ exemption in their lawsuit.
Florida Governor, Charles Crist and supporters of the new amendment have stated that the Save-our-homes amendment withstood similar court challenges in the past. However, many Constitutional Law experts think that the portability amendment could be successfully challenged as violating non-residents owners and first time home buyers.
This scenario is adding a large element of uncertainty. People who move now are faced with the possibility of losing the tax deduction if a judge rules that the ‘portability’ amendment is unconstitutional. In this case they would be stuck in a new home, having lost the advantage that was their main reason to move in the first place.
The possibility of derailing the new amendment provision is real, as per the words of Broward County Property Appraiser. However it must be implemented since it is law.
Meanwhile, a curious and unusual issue is faced by County Appraisers. An influx of people inquiring about raising the present “just value” of their homes. That would automatically increase the amount of tax relief that they could transfer to the purchase of a new home.
Since the transferable benefit is calculated by the difference between “just value” and assessed value, raising the “just value” would do the trick.
There are some objections about the validity of these claims. Complaints filed by homeowners have always been about their property being valued too high, not too low. There are some technical issues since the Value Adjustment Board, who decides about these complaints is supposed to decide only if the property is “over assessed”.
So much for the absurdities and inequities that plague much of our tax system.

Henry B. Nathan is a Real Estate Professional. Please visit my website:
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