Owning Guide
When you sell your Florida home, property taxes are prorated at closing. You pay the taxes you owe up to the date of sale, and the buyer takes over from there. Your Homestead Exemption is removed after the sale, and you may be able to transfer your Save Our Homes cap to your next Florida home under certain conditions.
If you are selling a home in Florida, you probably have questions about how property taxes affect the transaction. The short answer: taxes are prorated at closing, your Homestead Exemption is removed, and you may be able to take your valuable Save Our Homes cap with you. Here is exactly what happens.
Florida property taxes are paid in arrears. That means you pay taxes for the previous year, not the current year. When you sell, the taxes for the current year are prorated between you and the buyer at closing. You pay the taxes for the portion of the year you owned the home, and the buyer pays for the remainder.
Example: If you close on June 30 and your annual property taxes are $6,000, you would be responsible for roughly half the year ($3,000), and the buyer would be responsible for the other half. This is handled as a credit on your closing statement. You will typically see a credit from the buyer for the taxes they are prepaying on your behalf.
Important: The actual tax bill for the current year may not be issued until November. The closing agent estimates the proration based on the previous year's taxes or the most recent millage rate. If the actual tax bill is higher or lower, there may be a post-closing adjustment between you and the buyer.
Your Homestead Exemption ends when you sell your home. The Palm Beach County Property Appraiser is notified of the sale and removes the exemption from the property. The new owner will need to apply for their own Homestead Exemption by March 1 of the year following their purchase.
This means the property's assessed value resets to the sale price for the new owner, minus any new exemptions they qualify for. The buyer's tax bill will likely be higher than what you were paying, especially if you had owned the home for many years and had a significant Save Our Homes cap.
One of the most valuable benefits of Florida's Save Our Homes amendment is portability. If you sell your Florida home and buy another Florida home within a certain timeframe, you can transfer your accumulated Save Our Homes cap to your new home.
How it works: Any cap amount up to $500,000 can be transferred. If your old home has a market value of $400,000 but an assessed value of $300,000 (a $100,000 cap), you can port that $100,000 cap to your new home. The cap is applied to reduce the assessed value of your new home.
Timing: You must establish your new homestead within two years (three years for some circumstances). You file for portability when you apply for your new Homestead Exemption. The deadline is March 1 of the year following your new purchase.
Important limitation: Portability only applies when moving from one Florida home to another Florida home. If you are moving out of state, you lose the cap. Also, the cap transfers at a percentage: the dollar amount of your cap transfers directly, but the percentage discount may be smaller on a more expensive home.
TRIM notices are mailed in August each year. If you are selling your home, here is how the timing affects your transaction:
Since taxes are prorated by the day, the timing of your sale does not change the total tax you pay for the year. You pay taxes for the exact number of days you owned the home. However, there are two strategic considerations. First, if you are buying your next Florida home in the same year, the Homestead Exemption on your new home can reduce your total tax burden. Second, if you are selling late in the year, the cash you receive at closing will be reduced by a larger tax proration credit to the buyer. Plan your cash flow accordingly.
When you list your home, you should be prepared to share your current property tax information with potential buyers. Buyers will want to know what the taxes have been and what they might be after the sale. Be transparent about your current tax bill and explain that the buyer's tax bill will likely be different (usually higher) because the assessed value will reset to the sale price.
Your buyer's agent will typically estimate the post-purchase tax bill for the buyer. As the seller, providing accurate current tax information helps the transaction go smoothly and reduces the chance of surprises after closing.
When you sell your Florida home, property taxes are handled through proration at closing. Your Homestead Exemption is removed, and the new owner applies for their own. If you are buying another Florida home, portability allows you to transfer your Save Our Homes cap and save thousands in future taxes. I can help you understand how the sale affects your specific tax situation and what you can expect at closing.
More on property taxes and selling your home.
I can walk you through how the math works for your specific situation. No jargon, just practical answers.
For Ryan's full range of services, visit RyanParkerRealty.com.