The Big Three: Grandfathered, Homesteads & Portability

Grandfathered. Homesteaded. Portable.

All these words mean something very important if you purchased a home in 2010, relinquished a homestead in the past 2 years, are thinking about buying for the first time, are up- or down-sizing or just trying to maximize your savings on real estate property taxes.

These terms could mean more money in your pocket by taking advantage of an exemption to which you are entitled and a fairly overlooked state law.  Find out what the current taxes are and if the taxes on your home will go up or down, apply for $50,000 off the assessed value your home and find out if you are eligible to take your savings from your previous home with you and apply it to another home.

Applications for homestead and portability must be submitted by March 1st to the Property Appraiser’s office or you lose the opportunity for the current tax year.

Here's what you need to know:

• If you are buying a home, you are grandfathered into the current owner’s tax base. At closing the current taxes will be used to determine the amounts paid by the Seller & Buyer and to establish your escrow accounts and payments within your mortgage payment. 
• If a particular home is designated as your principal residence, you will want to homestead that home and claim your Homestead Exemption.  When you homestead a home you are designating to the property appraiser that the home is your principal residence in the United States. Once you homestead one residence you are not permitted to have another homestead property elsewhere in the U.S.  The benefit of homesteading your principal residence is $50,000 off your assessed value for tax assessment purposes plus the Save our Homes Cap .  The Save our Homes Cap means that the assessed value may not increase more than 3 percent or the consumer price index change, whichever is lower.  There some exceptions.  When you buy a home, the property appraiser is going to re-assess it for a new value.  That new value could go up or down.  This change could make a big difference in your monthly payment so its important to get an accurate estimate.  Another exception to the cap is an addition to the home.  Once an improvement or addition to the home is completed, the property appraiser’s office will come out to the home and give it a new value.  So keep in mind adding a room, a second story, an in-law suite or a pool may very well mean a re-assessment of value.  Many homeowners don’t factor this into the cost of the improvement.
• When you have lived in a home for some time with a Save our Home Cap, if you decide to move you can apply for Portability.  This means you can take your current assessed value (which was protected by the cap for many years) with you to the new or other home to reduce the assessed value.  Reducing the assessed value along with your homestead exemption may reduce your taxes.  So if you purchased a home or relinquished a homestead on a property in the last 2 years, don’t forgot that you may benefit from this portability. Just remember there are limitations, including the $500,000 maximum cap, which may be used an unlimited amount of times and can be used whether up- or down-sizing. Portability can be confusing but the Property Appraiser's office can assist you with the determination.

When the state passed the amendment 1 three years ago, the additional savings apportioned to a homestead property were to encourage home ownership and provide relief from rising property taxes.  Portability was introduced to give incentives to homeowners who had been in their home a long time to either up- or down-size and take the benefit of their “cap” with them.

Know what your obligations will be at the closing and get an accurate estimate of next year’s taxes if you are considering buying a new home in 2011. After closing and before March 1st of the next year, file your homestead and/or portability application. You may be entitled to other exemptions if you are a veteran with a disability, active military, disabled, blind, widowed or over 65 years of age.  Go to this link for more information.