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05/01/2023
Florida court: No homestead tax exemption on exclusively rented residence
On April 6, in the case of Furst v. Rebholz; No. SC2020-1479, the Florida Supreme Court ruled that a homeowner is not eligible for a homestead tax exemption on the portion of a residence that is rented exclusively to a tenant.
The Florida homestead exemption provides several important benefits to homeowners, including protecting from forced sales by creditors as well as providing for a 3% cap annually on an increase in the appraisal value of the residence.
There are two important requirements to qualify for the homestead exemption:
- The homesteaded property must be in the name of the individual and cannot be owned through an entity.
- The property must be owner-occupied.
The issue in this case involved rental of a portion of the homesteaded property rather than exclusive use by the owner.
In this case, the Supreme Court stated, in pertinent part, that residency is a use-based requirement per Subsection (1)(a) of Section 196.011 of the Florida Statute. Section 196.031(4) provides that “the [homestead] exemption provided in this section applies only to those parcels classified and assessed as owner-occupied residential property or only to the portion of property so classified and assessed.” The Supreme Court of Florida sided with the County Property Appraiser and ruled that the portion of the property that is rented out for income is not considered the permanent residence of the owner, and therefore the owner should not have received a homestead property-tax exemption for that part of the property.
The Court also indicated that this case should not impact individuals who work from home and use part of their home for business activities.
What does CohnReznick think?
Although the total tax in dispute in this case was not material, the Florida Supreme Court’s decision signifies enforcement of a longstanding statute and policy governing the use of the homestead exemption. While the Court did limit the right of the homeowner to claim the whole property as homestead where a portion of the residence is rented, the Court reinforced a homeowner’s right to work from home and still qualify for the homestead exemption. As many individuals relocate to Florida, homeowners must review qualifications both on ownership as well as the exclusive use to make sure the homestead exemption is not tainted in any way.CohnReznick Tax: Alerts and Webinars
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Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.