The New “Newlywed” Exception to Documentary Stamp Taxes

Florida imposes documentary stamp taxes on transfers of Florida real property. The tax is based on the consideration paid for the property. Generally, if real property that is transferred is encumbered by a mortgage and the purchase price is less than the mortgage amount (or there is nothing otherwise paid), the mortgage amount is treated as consideration for purposes of calculating the tax.

This tax arises on transfers of encumbered real property, even if the transferor and transferee are married to each other. Given other exemptions for intra-spousal transfers under law (e.g., as to the federal estate tax, and under the Save Our Homes cap on ad valorem taxes), this is surprising and somewhat disheartening. Oddly enough, Florida law will NOT impose the tax on transfers of a marital home between spouses or former spouses when the transfer is incidental to a divorce. Fla.Stats. §201.02(7)(a). Of course, if there is no mortgage on the property and nothing is paid for the property, an intra-spousal transfer will not be subject to stamp taxes.

Under a new provision of law that came into effect in July, spouses can now transfer encumbered homestead property between themselves without incurring documentary stamp taxes, if no other consideration is paid. However, this new provision applies only to transfers within one year of marriage. Therefore, newlyweds can use it – spouses who have been married over a year cannot. This one year limit is also a trap for unwary newlyweds – if they take more than a year to reorganize their real property holdings, the tax will apply.

As noted, the transferred property must be homestead property. The applicable definition of “homestead” for this purpose is the ad valorem tax definition under Fla.Stats. §192.001 and the ad valorem tax provisions of s. 6(a), Art. VII of the Florida Constitution.

Any tax exemption is a good exemption (from the perspective of taxpayers), but the limitation of this new exception to newlyweds seems unduly restrictive. It appears to allow newlyweds to add a spouse to the title as part of new marriage restructuring, but why not open it up to other transfers? For example, spouses that desire to transfer homestead property owned by one spouse to TBE so as to allow for an automatic transfer at death to the surviving spouse should be able to do so without the tax. As matters stand now, if there is a large mortgage on the property, the stamp taxes can make such transfers and planning cost prohibitive.

Fla.Stats. §201.02(7)(b)