Downsizing after kids move out: a practical plan for your Tampa house

Does the house still fit after the kids move out?

When the household gets smaller, the rooms stay the same size, and so do the roof, the air conditioner, the lawn and the insurance policy. That alone is not a reason to move. It is a reason to ask what each part of the house does for you now.

Note which rooms you use on an ordinary weekday, then go through the list below. None of these items means you must sell. Several together usually mean the question deserves a real answer.

• Bedrooms sit closed most of the year, yet you still cool, clean and insure them.
• The yard, a pool or gutters take time you would rather spend elsewhere, or money you would rather keep.
• Stairs, a tub you step over or a long walk from the garage make daily routines harder.
• A large repair is coming, such as a roof or an air conditioning system, and you are not sure the house is worth it to you.
• Insurance, taxes and upkeep take a bigger share of your budget than they did.
• The house is a long drive from the people, work and activities that fill your week now.
• You keep the extra rooms mainly as storage.

If most boxes stay empty, staying put can be the right answer, and nothing on this page argues otherwise. If several are checked, our guide on when to downsize, with signs and Tampa timing goes deeper on reading the signals and choosing a month.

Give the decision a season

The weeks after a household shrinks are a poor time to make an irreversible choice. A quiet house can feel bigger than it is, and the feeling can fade or grow. Setting a review date a few months out, and using the time to gather facts rather than to decide, keeps your options open.

Useful facts to collect in that window:

• Your home's just value and assessed value from the Hillsborough County Property Appraiser and the latest tax bill.
• Recent utility, insurance, lawn, pool and repair bills, so you know what the house costs to run through the seasons.
• Your purchase records and receipts for major improvements, which matter for federal tax on the sale.
• A rough list of what you would want in a smaller home and what you would not miss.

Feelings about the house belong in the decision too. Our guide on how to cope with leaving a long-held home covers the emotional side, disagreements between partners and settling in after the move.

What to sort first when the house is bigger than you need

Sorting can take months, and it can start long before any decision to sell. If you stay, the house is easier to keep. If you move, the work is already under way.

1. Unused rooms and closets. Start where there is the least to decide: linen closets, a spare room and storage that has sat untouched for years.
2. Belongings stored for other people. Make a list, tell each owner what you have and set a clear pickup date in writing. Whatever is not collected by then gets sold or donated.
3. Duplicates and oversized furniture. A dining set for a long table, a second sofa or a full garage of tools may not fit a smaller floor plan. Measure before you decide.
4. Paper. Keep tax returns, closing statements, deeds, improvement receipts and insurance records together. They matter for the sale.
5. Keepsakes and photographs, last. These decisions get easier with practice, so leave them until the rest is done.

Our guide on what to keep when downsizing gives decision rules for furniture, collections and sentimental items. For the things you let go, estate sale, consignment or donation compares the ways to sell or give them away.

Where to look next: condo, townhome, villa or single story

Once you know roughly how much space you use, the next question is what kind of home delivers it. Each type trades space and control for convenience and shared costs.

Our guide to choosing a condo, townhome, villa or single-family home lays out these trade-offs in detail. If stairs are part of the reason to move, single-story homes in Tampa covers what to look for in a one-level floor plan.

Before you shortlist anything, get an insurance quote. Do not judge a home's taxes by the current owner's bill, for reasons the homestead section below explains.

Selling the house: the federal home sale exclusion

The Florida Department of Revenue says Florida does not impose a personal income tax, so there is no state income tax on the gain from selling your house. Federal tax can still apply when the gain is large enough, under rules set by the IRS.

• The exclusion. If you have a capital gain from the sale of your main home, you may exclude up to $250,000 of that gain from your income, or up to $500,000 if you file a joint return with your spouse.
• The ownership test. You or your spouse owned the home for at least 24 months (2 years) out of the 5 years before the sale.
• The use test. You used the home as a residence for at least 24 months of the previous 5 years. On a joint return, both spouses must meet the use test, while only one needs to meet the ownership test.
• Different periods are fine. The ownership and use periods can be different 2-year stretches, as long as both fall within the 5 years ending on the sale date.
• The two-year rule. Generally you cannot use the exclusion if you excluded gain from another home sale during the two years before this one.
• One main home. IRS Publication 523 says an individual has only one main home at a time.

The exclusion may cover all of your gain or only part of it, so work out your gain before you set a price. Improvements such as additions add to your basis and reduce the gain, so gather receipts. Our guide on capital gains on a home sale in Florida walks through the gain calculation and the surviving spouse rule.

Reporting the sale

IRS Topic 701 says that if you receive Form 1099-S, Proceeds From Real Estate Transactions, you must report the sale even when the gain is excludable, and that you must also report it if you cannot exclude all of your gain. Reported sales use Schedule D (Form 1040) and Form 8949. Publication 523 says to keep records that document your basis until 3 years after the due date of your return for the year you sold.

Sources: IRS Topic 701, Sale of your home; IRS Publication 523, Selling Your Home; Florida Department of Revenue, personal income tax FAQ.

Homestead and Save Our Homes: what follows you to a new Florida home

If you have held a homestead exemption in Hillsborough County for years, your assessed value is probably below market value. That gap matters when you move.

The cap that built your benefit

The Florida Department of Revenue explains that after the first year a home receives a homestead exemption, its assessment each year cannot rise more than 3 percent or the percent change in the Consumer Price Index, whichever is less. This is the Save Our Homes assessment limitation, and the accumulated difference between assessed value and just (market) value is your Save Our Homes benefit.

What happens to the old house when you sell

The Hillsborough County Property Appraiser says that when a homestead property is sold, the exemption is removed and the assessed value increases to just value for the new year. The Department of Revenue puts it the same way: after a change of ownership, the property is assessed at just value on the following January 1. The same applies in reverse to the home you buy. The seller's tax bill reflects the seller's exemption and cap, not yours.

Portability: taking part of the benefit with you

Portability lets most Florida homestead owners transfer all or part of the Save Our Homes benefit from the old homestead to a new one in Florida. The key rules:

• Three-year window. You must establish a homestead exemption on the new home within three years of January 1 of the year you abandoned the old homestead, not three years after the sale.
• Forms and deadline. File Form DR-501T, Transfer of Homestead Assessment Difference, with the homestead exemption application, Form DR-501. The deadline is March 1.
• The cap. Section 193.155(8), Florida Statutes, limits the transferred difference to $500,000.
• Buying a less valuable home. When the new homestead's just value is lower than the old one's, the statute sets the new assessed value at the new just value divided by the old just value, multiplied by the old assessed value. In practice you keep the same ratio of assessed to market value, so the dollar benefit shrinks in proportion.

January 1 and the application

The Property Appraiser lists the requirements for a new homestead exemption: legal or beneficial title by January 1 of the year you apply, Hillsborough County as your legal domicile and residence on the property as of January 1. The statutory filing deadline is March 1, extended to the next business day when it falls on a weekend or legal holiday. Late applications are taken up to the 25th day after the yearly Notice of Proposed Property Taxes (TRIM) is mailed, which the office says is typically in August. After that, the office cannot accept an application for that calendar year.

If you buy outside Hillsborough County, you apply with that county's property appraiser, which works with Hillsborough County to confirm your old values. Our Florida homestead portability guide covers couples, co-owners and timing your closings around January 1, and the portability calculator runs the formula with your own values.

Sources: Florida Department of Revenue, PT-112, Save Our Homes Assessment Limitation and Portability Transfer; Section 193.155, Florida Statutes; Hillsborough County Property Appraiser, Homestead and other exemptions.

Keeping the old house as a rental: what changes

Some owners think about keeping the larger house and renting it out instead of selling. Run that idea past the tax rules first, because both the county and the IRS treat a rental differently from a home you live in.

• The homestead exemption. The Hillsborough County Property Appraiser says renting out your property would likely forfeit your right to claim a homestead exemption, and that you or your spouse claiming a homestead on another property at the same time is improper.
• Your duty to notify. The office says Florida law makes it the owner's responsibility to tell the Property Appraiser when a homestead is no longer the owner's permanent residence. If an owner was not entitled to the exemption, the property can be subject to a lien for the exempted taxes of the prior 10 years, plus 50 percent penalties and 15 percent interest.
• The federal exclusion. IRS Publication 523 says gain allocable to periods of nonqualified use is not excludable. Nonqualified use means any period after 2008 when neither you nor your spouse used the property as your main home, with exceptions. One exception covers the part of the 5-year period after the last date you used the property as your main home, but the ownership and use tests still have to be met when you sell.

Renting can still make sense for some owners. Ask a CPA to compare the after-tax numbers and call the Property Appraiser before you sign a lease.

Sources: Hillsborough County Property Appraiser, exemption compliance; IRS Publication 523, nonqualified use.

Closing costs on the sale: Florida documentary stamp tax

Florida taxes deeds that transfer real property. Section 201.02, Florida Statutes, sets the tax at 70 cents on each $100 of the consideration. Consideration includes the money paid and the amount of any mortgage or other encumbrance. Which party pays the tax on the deed is set by your sales contract, so ask your agent or closing agent to show it on your estimated settlement statement before you list. It is one of several costs that reduce what you take home from the sale.

Source: Section 201.02, Florida Statutes.

A working order of steps

Every move runs on its own schedule. This order keeps the costly decisions until after the cheap ones.

Selling the house and choosing what comes next

Timing a sale against a purchase is easier with someone who knows the local market. If you would like an introduction to an agent on the operating team at eXp Realty, you can get matched.