Amendment 5 Impact on Home Sellers
Amendment 5 Florida
On November 3, 2020, Florida residents voted to pass Amendment 5 into state legislation by 51.96% in favor and 48.04% not in favor. The amendment extends the opportunity for residents with a homestead exemption 3 years rather than 2 to file portability on tax benefits. With existing home inventory continuously declining, if you are thinking about selling your Florida home, now is the time. The Southeast Florida real estate market has been consistently seller-dominated as of late, but experts predict this to change abruptly. Are you considering selling your Florida home but still on the fence? The market numbers and the passing of Amendment 5 are two reasonable considerations for potential sellers to look at. Wondering what the correlation is between Amendment 5 and Florida sellers? Continue reading to find out.
What to Expect
Throughout this article, we will go over the latest real estate market numbers in Palm Beach County. Next, we will go over property tax exemptions in Florida. We will discuss the Homestead Tax Exemption, the Save Our Homes Tax Benefit and finally go into how the passed Amendment 5 Florida 2020 decision impacts home sellers.
Palm Beach County FL February 2021 Market Numbers
There is currently a high demand for existing homes. Single family home average sale prices are up, the number of days on the market is down, and inventory is depleting. Right now, chances are you will have multiple offers on your house, go to contract, and close quickly with a sale price considerably more than the market value. Year over year, February cash sales were up 13.2%, and in 2021 alone, the cash sales accounted for 15.5% of the total number of sales.
The Homestead Exemption legislation has been around since the Civil War era. Originally it was designed to safeguard widowed spouses, protect debtors from having their home sold or seized by creditors, and provide financial relief through tax breaks. Additionally, the Homestead Exemption was a perk to entice people to relocate to Florida. Filing for Homestead Exemption can be done through your county property appraiser website and must be done between January 1st and March 1st.
Homestead Exemption in the state of Florida allows a $25,000 exemption on the home's assessed value, including school district taxes. The next $25,000 is fully taxed. The $25,000 portion from $50,000 to $75,000 is exempt, however, this portion is not applied to school district taxes.
Depending on the assessed value, an additional $25,000 may be awarded exemption. The Palm Beach County Property Appraiser website is user-friendly and steps you through the process. You can electronically file or print the forms to file manually.
Save Our Homes, SOH Benefits, Portability
Florida's Save Our Homes Act, referred to as SOH, puts a seller with Homestead Exemption in a position to transfer tax benefits from one primary home residence to a new primary residence. The new home must be filed as a primary residence, and the Homestead Exemption filed. Portability is the term used for this transfer of tax benefits. SOH allows up to $500,000 in portability. The equation for finding out your portability is to take a look at your prior home, take the market value, and subtract the assessed value. The difference is then subtracted from your new home's assessed value, giving you a current assessed value for taxes. The SOH benefit includes a 3% cap on the property taxes, or the percentage change of the consumer price index, whichever is less. Your local County Property Appraiser will provide you with all the tools necessary to file for Portability. For example, check out the portion on portability on the website for Palm Beach County Property Appraiser.
A new home is assessed at $450,000. Your previous home has a market value of $300,000, with an assessed value of $200,000, your portability is $100,000. New home, $450,000, minus portability of $100,000, for a final assessed value at $350,000.
Florida's Amendment 5
Florida's Amendment 5 has extended the amount of time allowed to file for "Save Our Homes" portability to 3 years if you have homestead exemption. What does this mean for sellers? If you sell now, you will have a bit more time to file your SOH portability benefits. This gives you an extra grace period if you have not found your perfect new home, are renting, or have other circumstances keeping you from immediately purchasing a new home. Note that this extension is for 3 tax years or calendar years. This means no matter what month you sell your home in, that calendar year is number 1.
As shown by the latest numbers, the market still favors the seller, but this could change anytime. Amendment 5 now grants sellers flexibility after a home sale regarding transferring tax benefits. In this article, we noted the latest Palm Beach County real estate market numbers to highlight the increase in sales prices, the decrease in days homes are on the market, and the enormous lack of existing home inventory. We also discussed the Homestead Tax Exemption, the Save Our Homes Tax benefit, and how the amendment 5 Florida 2020 decision impacts home sellers.