Underwater Treasure: Equitable Distribution of the Save Our Homes Limitation

Florida homeowners now have a new asset to consider in divorce proceedings: the homestead tax assessment limitation, which is now portable. This means that when a home is sold, a portion of the tax savings from the homestead exemption can be transferred to a new home. This could have a big impact on the division of assets in a divorce. The SOHA portability rule affects property taxes when real estate values change. But now, it’s causing a problem in family law. Is it a tax consequence or a marital asset? This matters because the court only considers tax consequences, but has to actually divide marital assets. If it’s seen as a tax consequence, both spouses take the benefit when they sell the home. In Florida, when dividing property during a divorce, it’s important to consider the tax consequences to ensure a fair outcome. The value of a property may not accurately reflect its worth if tax consequences are not taken into account. In some court cases, it was emphasized that tax consequences should be considered in equitable distribution.

For example, in a case where a couple split and each established a new homestead, the tax benefit they can transfer to their new homes depends on the values of their old and new properties. There is a maximum benefit of $500,000 that can be transferred. After a divorce, if both spouses owned their home together and then sold it, they can each use part of the property tax savings from their old home on their new homes. This is called Save Our Homes Amendment (SOHA) portability. They have two years to do this after selling their old home. They can divide the savings unequally if they agree to it, just like they might do with other assets in their divorce. The Department of Revenue says that the tax benefit from the Save Our Homes Amendment cannot be split in a divorce, so if one person keeps the house, they get to keep the tax benefit too. This could only change if the law is updated. One way to split the SOHA benefit in a divorce involves one person keeping the home and the other person getting compensation in the divorce settlement. This could be done by classifying the SOHA benefit as a marital asset, like a capital loss carryover, and distributing it as part of the divorce agreement. This would allow the person who leaves the home to get a credit or payment for giving up their right to the SOHA benefit, while the other person keeps the home and the full SOHA benefit. If unmarried people live together and own a home, they may have trouble transferring a tax benefit if they move to a new home. This is because only the person who applied for the tax benefit can transfer it to a new home, not both people. This can cause problems for unmarried couples and former spouses. The law needs to be changed to treat all families more fairly and to share the tax benefits more equally. Many people in Florida have used this tax benefit to transfer billions of dollars when they move to a new home. This is a list of sources for information about Florida property valuations and tax data. It includes links to different laws and rules about property taxes in the state. It also mentions a rule about transferring tax savings when you move to a new home. When a married couple gets divorced and one of them moves to a new home, they may want to split the assessment difference on their former home, but the law requires that the previous homestead be abandoned before a transfer can occur. This means that one spouse may need to abandon the homestead as of January 1st following the divorce, and then both spouses can transfer their share of the difference to their respective new homes. This is important because the rules for married and unmarried joint title holders are different when it comes to receiving the homestead exemption. The Department of Revenue has published data on the impact of these rules for homestead property portability. Ronald H. Kauffman is a lawyer who specializes in family law in Miami. He is a member of The Florida Bar Family Law Section. He thanks Evan Marks of Marks & West, P.A., in Miami and the Department of Revenue in Tallahassee for their helpful comments. This column is submitted on behalf of the Family Law Section, with Diane M. Kirigin as chair, and Sarah Sullivan and Amy Hamlin as editors. The main message is that the legal profession aims to serve the public and improve the justice system.

Source: https://www.floridabar.org/the-florida-bar-journal/underwater-treasure-equitable-distribution-of-the-save-our-homes-limitation/