Florida court opinion could impact taxes when transferring property
Property owners should consult with legal, tax professionals about potential tax implications
Property owners should be mindful of a recent court case that could have tax implications for anyone considering transferring Florida residential property to an LLC, partnership or trust.
Based on the March 15th opinion issued by Florida 3rd District Court of Appeals in the case of S and A Property Investment Services, LLC v Pedro Garcia, Miami-Dade County Property Appraiser, et al (Case No. 3D22-835), transferring non-homestead residential real property to an LLC, partnership or trust could trigger an increase in annual ad valorem taxes. The change of ownership can lead to the property owner losing their built-up non-homestead, 10% real property tax cap benefit, which could ultimately result in a higher tax bill.
Florida Statute Section 193.1554 provides that a non-homestead residential property owner’s assessed value for property tax purposes cannot increase by more than 10% from one year to the next – this 10% assessment limitation is retained so long as the property does not undergo “a change of ownership or control.” If there is a deemed change of ownership or control, the property shall be assessed at just value as of January 1st of the year following such change in ownership (i.e., the 10% cap is lost).
In the Florida court case, the individual property owners – a married couple who owned the property as tenants by the entirety – established an LLC to own the property to insulate themselves from personal liability. After the transfer, the Miami Property Appraiser assessed the property at its just value, which was more than double the prior year’s assessed value, thereby removing the 10% cap and more than doubling the real property tax in said property. The taxpayer appealed, arguing the transfer was merely a change of “legal and equitable title” and that they retained “beneficial” title. However, the Court disagreed and affirmed the increase in assessed value.
Although there are situations in which transferring non-homestead property to an LLC, partnership or trust makes sense, property owners should consult with their tax professionals and attorney about potential tax implications before making any changes. If you are considering a property transfer, contact Kaufman Rossin’s tax team. Our professionals have expertise in estate and trust tax planning, state and local tax, and other tax issues.
Ken Rios, JD, is a Tax Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.
Scott Goldberger, JD, CPA, is a Estate & Trust Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.