Buying a House Before Selling in Florida: Homestead, Portability and Tax Timing

By Travis Penny, Senior Mortgage Broker, NMLS 1649161.

This is general information, not tax advice. Talk with a tax professional or CPA about your situation before you buy or sell.

If you are buying a house before selling yours in Florida, the loan is only half the plan. The other half is timing. Florida's homestead exemption, Save Our Homes portability and the federal rules on selling a home all depend on dates, and how they apply depends on your own facts. I'm a mortgage broker, not a tax advisor, so treat this as a list of topics to raise with your CPA, not an answer.

For how the financing works when you still own your current home, see my buy before you sell page. This post covers the tax topics that come up with the timing.

Homestead: tied to your permanent residence

Florida offers a homestead exemption on a home that is your permanent residence, and the rules generally allow one homestead at a time. The state sets a residency date and an application deadline each year, and your county property appraiser handles the filing.

When you buy first, the date you close and the date you move in can affect which home is treated as your homestead for a given tax year. That in turn can affect the property tax bill on each home while you own both. Your county property appraiser and your tax professional can tell you how the rules apply to your dates.

Save Our Homes portability

Save Our Homes limits how much a homestead's assessed value can rise each year. Portability is a Florida program that may let some homeowners transfer part of that benefit to a new Florida homestead, within limits and time frames set by state law, and it requires its own application. Whether it applies to you, and how much transfers, depends on your situation. Ask your property appraiser and tax professional before you set your closing dates.

Capital gains when the old home sells

Federal tax law includes an exclusion that may let some sellers exclude part of the gain on the sale of a main home, if ownership and use tests are met. Whether you qualify, and how much of any gain is covered, depends on your facts, including how long you owned and lived in the home and whether it was ever rented. Your tax professional should review this before you list or buy.

Carrying two homes: the real monthly cost

While you own both, you pay two sets of property taxes, two insurance policies, and in Florida, often flood insurance on both. Budget for at least a few months of overlap. In a slower market, plan for more.

How you qualify for the new loan

The lender counts your current home's full payment against you. On the program I use, the appraiser's market rent on the current home, at 80%, can offset that payment, with no lease needed. Other paths are a bridge loan or a HELOC on the current home, compared on my Florida bridge loans page.

If the seller of the new home will give a credit, it can soften the overlap months. I compare that with a price cut in seller concessions vs a price cut.

---

Send me your current home, your target area and your rough dates, and I'll lay out the cleanest way to buy first. Start your application, or reach me through my contact page.

This is general information, not tax advice. Talk with a tax professional or CPA about your situation before you buy or sell.

Travis Penny, Senior Mortgage Broker, NMLS 1649161 | Vision Mortgage, NMLS 1286953 | Residential loans in Maine and Florida.