Dividing Property & Tax Issues

[buggywhip maker]

My spouse and I have owned our home in Florida for 15 years. Florida has a law whereby the taxable assessment cannot be increased by more than 3% annually, so we are being taxed on an amount lower than current market value. Of course, if we sell, the new owner would be taxed at the current market value.

The house sits off-center on a double lot and the lot can be divided. We are thinking about splitting the lot and using the vacant half as collateral for a loan to start a small business, with our existing mortgage remaining on the other half. The mortgage holder is agreeable to the split because the value of the house is in considerable excess of the mortgage, even on a smaller lot.

So, the question is, by splitting the lot do we lose our current cap on our homestead property tax? We won't be selling anything, and I know that taxes on the vacant lot would likely be based on current market value, but will the status of our home change, taxwise?

 

[seniorjudge]

My spouse and I have owned our home in Florida for 15 years. Florida has a law whereby the taxable assessment cannot be increased by more than 3% annually, so we are being taxed on an amount lower than current market value. Of course, if we sell, the new owner would be taxed at the current market value.

The house sits off-center on a double lot and the lot can be divided. We are thinking about splitting the lot and using the vacant half as collateral for a loan to start a small business, with our existing mortgage remaining on the other half. The mortgage holder is agreeable to the split because the value of the house is in considerable excess of the mortgage, even on a smaller lot.

So, the question is, by splitting the lot do we lose our current cap on our homestead property tax? We won't be selling anything, and I know that taxes on the vacant lot would likely be based on current market value, but will the status of our home change, taxwise?

Q: So, the question is, by splitting the lot do we lose our current cap on our homestead property tax?

A: Yes, IF you sign a deed splitting up the lot. If, on the other hand, the lender is just taking (for example) the west half of the property for collateral and there is no change in the titling, then it shouldn't affect your taxes.

Having said all that, you need to hire a real estate lawyer and also ask the tax people. You could lose a lot of dough if this is not done correctly.