Downsizing after divorce in Florida: keep, buy out or sell the house

Divorce after years together, including divorce after 50, often means leaving a house that was bought for a different life. It can be a relief, a grief or both. The practical questions below do not have to be answered in a week. But some choices made early in the process, like moving out or changing a deed, are hard to undo, so it helps to know what is at stake.

How Florida divides the house

Florida is an equitable distribution state. Section 61.075 of the Florida Statutes tells the court to begin with the premise that marital assets should be divided equally, then lets it depart from that using a list of factors. Those include each spouse's contributions to the marriage, economic circumstances, the length of the marriage, and any interruption of careers or education.

Two points matter for a house:

• Marital or not. Assets acquired during the marriage are generally marital. A home one spouse owned before marrying, or received as an inheritance or gift, may be nonmarital in whole or part, though how the home was used during the marriage can matter. Property held by both spouses as tenants by the entireties is presumed marital.
• The marital home gets special attention. The statute says the court first considers whether keeping the home would serve a dependent child's best interest. If it would not, it considers whether other equities support giving one party exclusive use and possession. Keeping the home must also be financially feasible until the child is emancipated or possession otherwise ends.

The statute sets a cut-off date for identifying marital assets, generally the earliest of a valid separation agreement, a date set in that agreement or the filing of the divorce petition. A court can value assets on whatever date or dates it finds just and equitable. Ask your attorney which dates apply to the house, since values change.

Source: Fla. Stat. 61.075.

Keep or sell the house in a divorce: three paths

If you have been in the house for decades, keeping it can feel like the only way to stay yourself. It is worth asking whether it is the right size for one person. A home sized for a family often costs more to insure and maintain than people expect, and our guide to whether downsizing is worth it helps weigh that. Seeing the real numbers first often settles the question.

Taking a person off a deed and taking them off the loan are two separate steps. Ask your attorney and a lender how both happen in your plan, and in what order, so that neither of you is left owing on a house you no longer own.

Selling the house in a divorce in Florida

When the house is sold, the practical work looks much like any sale, with a few additions. Both owners usually sign. Agree in writing who pays the mortgage and carrying costs until closing, who decides on price and offers, and how proceeds are split. An attorney can put this in the settlement agreement or ask the court to approve it.

Preparation matters because buyers pay for condition. Our guide on preparing an older Tampa home to sell and the Florida seller disclosure guide apply to both of you. See estimating net proceeds for the line-by-line math, and hidden costs of downsizing for the costs on the other side of the move.

If emotions are high, it helps to agree on a neutral way to decide things, such as using one agent you both are comfortable with, and your attorneys communicating about showings and offers. Introductions through this site go to agents on the operating team at eXp Realty, so you can ask any agent how they handle a sale with two owners who are no longer together.

Taxes: the home sale exclusion for each spouse

Florida has no state income tax, so the question is federal. Our guide on capital gains on a home sale in Florida explains the exclusion in full. The short version for divorcing owners:

• Each person can generally exclude up to $250,000 of gain if they owned and lived in the home as a main home for at least two of the five years before the sale. If you sell while still married and file jointly, the limit is $500,000. Once you file as single people, each of you has your own $250,000.
• Moving out does not automatically cost you the exclusion. IRS Publication 523 says you may treat the home as your residence after separation or divorce if you owned it and your spouse or former spouse is allowed to live there under a divorce or separation instrument and uses it as their main home.
• Transfers between spouses are generally not taxed at that moment. The publication says a transfer of the home to a spouse or ex-spouse as part of a divorce settlement generally produces no gain or loss for you.
• The person who receives the home takes over the old basis. For a home acquired after July 18, 1984, the starting basis is the transferring spouse's adjusted basis, or the combined adjusted bases of both halves if you co-owned it. That means the tax is deferred rather than erased, and it shows up when the keeper later sells.

The IRS lists a divorce among the events that can qualify for a partial exclusion when the full two-year tests are not met. A CPA can say whether your facts qualify. Timing a sale before or after the divorce is final can change the filing status and the limit, so ask your CPA before the date is set.

Source: IRS Publication 523, Selling Your Home.

Deed tax when the house changes hands between you

Florida charges documentary stamp tax on deeds at 70 cents for each $100 of consideration, and a mortgage balance can count as consideration. Section 201.02(7)(a) exempts a deed between spouses or former spouses made under a dissolution action when the property is or was their marital home. Another provision exempts transfers of homestead between spouses when the only consideration is the mortgage or lien. These exemptions have conditions, so have your attorney and the closing agent confirm they apply before the deed is recorded.

Source: Fla. Stat. 201.02.

Homestead and portability when a joint homestead splits

If you have owned your Tampa home for many years, its taxable value is probably held down by the Save Our Homes cap, and that savings is worth protecting. Three points from the statutes are worth knowing:

• A transfer of title between husband and wife, including one due to a dissolution of marriage, is one of the exceptions to the rule that a change of ownership resets the assessment (s. 193.155(3)). A spouse who keeps the home does not lose the cap simply because the title moved to one name.
• When spouses who are married on the date they abandon a jointly titled homestead move to a new one, the statute lets them designate each spouse's share for calculating the portable reduction, and the designation is filed with the property appraiser before the homestead application. The condition is that they must still be married on the date of abandonment.
• After a divorce, how the savings are divided is not spelled out in that statute. County property appraisers describe different approaches, and settlements can address it. Raise it with your attorney before the home is sold, not after.

Our guide on Florida homestead portability explains how portability works on a new home, and the portability calculator gives a rough picture. Remember also that a new homestead exemption must be filed by March 1, as described by the Hillsborough County Property Appraiser. The Property Appraiser at (813) 272-6100 can confirm how a divorce affects your exemption.

Sources: Fla. Stat. 193.155; Hillsborough County Property Appraiser.

Buying a smaller home after divorce

Many people find the next home is easier to choose once the old one is settled. A few Florida points to check:

• What you can afford on one income. Speak to a lender early, before you set a price range. A lender will explain what income it can count and what it needs documented.
• Buy first or sell first. If the house will sell as part of the divorce, see buy first or sell first for the trade-offs.
• Renting for a time. Some people rent while things settle. Our guide on rent or buy after downsizing compares the two.
• The type of home. A condo, townhome or villa each carries different costs. Read condo, townhome, villa or single family and, if a condo appeals, downsizing to a condo in Tampa.
• Insurance. Premiums and flood zones vary a great deal by address. See hurricane and flood insurance when downsizing.
• Where to live. Our where to downsize page and the 55+ communities guide describe areas worth visiting.

The Costs and Money page brings the pieces together, and the step-by-step downsizing guide gives an order to work in.

Timing: what to do first

1. Talk to a Florida family law attorney before any change to the house, the deed or the mortgage.
2. Gather the paper. Deed, mortgage statement, tax bill, insurance policy, the original closing statement and records of improvements.
3. Get a realistic value, then see what a sale or buyout would leave each of you.
4. Check the tax side with a CPA before dates are set.
5. Plan the move itself only once the legal path is clear. Moving day in Tampa and what to keep when downsizing help then.

If you need support through the change, our guide on coping with downsizing speaks to the emotional side, and the resources page points to local help. The guide on downsizing after the death of a spouse covers a different but related situation.

When you are ready to talk about a sale, you can request an introduction. Introductions go to agents on the operating team at eXp Realty, so this is not a search of the whole market, and the agent, not this site, handles the sale.