What Florida Property Owners Must Know to Avoid a Major Tax Surge
Introduction
Many real estate owners reflexively consider transferring non‑homestead residential property (e.g. rentals, vacation homes, investment properties) into an LLC or trust for liability protection or estate planning. But under Florida law, doing so may unintentionally void your Assessment Limitation — triggering a reassessment that wipes out years of tax savings. This article breaks down the legal risks, a leading court case, and best practices to protect clients from a costly surprise.
Florida’s 10% Cap: What You Gain — and What You Risk Losing
Under Florida Statute §193.1554, non‑homestead residential properties enjoy a cap: their assessed value cannot increase more than 10% annually, so long as no “change of ownership or control” occurs.
If a transfer is deemed a change of ownership or control, that cap is lost and the property must be reassessed at full “just value,” exposing the owner to a dramatic tax jump.
Case in Point: S & A Property Investment Services, LLC v. Garcia
In 2023, the Florida 3rd District Court of Appeal rejected an owner’s attempt to preserve the cap after transferring property into an LLC. The assessed value leaped from ~$104,000 (with the cap) to ~$273,000 (just value) — a nearly 160% increase.
The owners argued the transfer was merely legal vs. equitable title (which is a statutory exception), but the court disagreed. Because the LLC was a separate entity, the deed triggered a “change of ownership.”
This decision sends a clear message: even 100%‑owner transfers to an LLC may not avoid reassessment.
Key Risks for Real Estate Investors & Advisors
Risk | Explanation |
Immediate Tax Spike | Reassessment to full just value can lead to huge tax bills. |
Reset Assessment Floor | The new base becomes the higher value, compounding future increases. |
Uncertain Shield of Exceptions | The “legal vs equitable title” exception has not been broadly held in tax cases. |
County Variation | Some property appraisers may interpret transfers more strictly. |
Smart Alternatives and Best Practices
- Use a Revocable Trust — Transfers into revocable trusts typically do not trigger a change and preserve the cap.
- Retain Direct Ownership — If asset protection is minimal, maintaining ownership in your name may avoid risk.
- Thorough Analysis Before Transfer — Run a tax forecast comparing liability protection benefits vs. tax cost.
- Consult with Local Appraiser — County policies differ. Ask how they’d treat an LLC transfer.
- Document Informed Consent — If a client insists on a transfer, ensure they sign disclosures acknowledging tax risks.
Final Takeaway
While LLCs and trusts offer liability benefits, they carry a real danger for Florida non‑homestead property owners — losing your assessment cap can mean a tax explosion. As advisors, we must weigh tax exposure against protection goals and educate clients about this often‑overlooked trap.