Renting Out Your Homestead?

Saturday, June 19, 2010 at 08:32AM

In The Official Snowbird's Guide to Becoming a Florida Resident you learned the value of the homestead exemption and the method for obtaining it.  This article will touch on a common danger to preserving your homestead tax exemption.

Many Florida residents, especially those transplanted from other states, spend only a portion of the year in Florida.  The rest of the time their Florida home is vacant.  As they watch the economy erode their investments, some of them begin to explore the idea of renting out their home.

One problem of renting your home for part of the year is the possibility of losing your homestead tax exemption.  You're not the only one looking for a little additional income.  The counties are also scratching a clawing for ways to fill in the big hole in their budgets.  As a result, the county Property Appraisers are on the lookout for residents that have abandoned their homestead tax exemption.  One of the things they look for is resident property owners who rent out their homes.

Section 196.061 of the Florida Statutes reads: "The rental of an entire dwelling previously claimed to be a homestead for tax purposes shall constitute abandonment of said dwelling as a homestead, and said abandonment shall continue until such dwelling is physically occupied by the owner..."

Most Property Appraisers interpret this as saying that an owner who rents his homestead loses the exemption for the year of the rental.

What does this mean to you?  If the Property Appraiser's interpretation is upheld -- bad news, that's what.  You can lose the tax exemption which will cost you hundreds of dollars each year in increased property taxes.  Additionally, and even more damaging, your assessed value for property tax purposes will jump up to equal the market value of your property.  This also will result in increased property taxes.  In future years, you will have to re-apply for the exemption.

While this is bad enough, the pain doesn't end here.  Florida law requires property owners to notify the Property Appraiser's office if you no longer qualify for the homestead exemption.  If you fail to inform the Appraiser and continue to take advantage of the exemption when you no longer qualify, you can be hit with some painful penalties.  You may have to reimburse the county for back taxes -- as far back as 10 years -- plus 50% penalties and 15% interest.  OUCH!!!

Does this mean you can never rent your homestead property?  Not necessarily.  The statute you looked at earlier in this article provides an exception.  If you qualify for homestead exemption on January 1 of a certain year and are not renting the property on that day, the rental of your home after January 1 will not affect the homestead tax exemption for that year.  However, you cannot use this exception for 2 consecutive years.

So it appears you can rent out your homestead property every other year if the lease term commences January 2 or later.

However, before deciding to rent your home, it would be a good idea to seek advice from your Florida attorney who is familiar with the homestead law.