Documentary stamps and transfers between spouses

Recently the Elder Law Listserv has had a series of comments regarding documentary stamps on transfers between spouses. This article briefly covers this topic as well as provides an update on current law.

Florida Statutes § 201.02 imposes a documentary stamp tax on inter-spousal transfers of encumbered real estate. When one spouse adds the other to a deed on encumbered real estate, this often leads to the surprise documentary stamp tax result. In that case, a tax would be imposed on one-half of the mortgage note balance.

There has long been an exception in the law for conveyances incident to divorce. Therefore, the tax result was better if the client got divorced. The Tax Section and other sections of The Florida Bar, the Florida Land Title Association, and other groups advocated for a change to the law, in what I refer to as the “Defense of Marriage Doc Stamp Act.”

Last year the Legislature made the change—sort of. Fla. Stat. § 201.02(7) was added to exempt the conveyances of homestead property between spouses, even if the property is encumbered. That change, enacted July 1, 2018, was limited to transfers within one year of marriage. The reasoning for the time limit was that removing the one-year limit would cost the State too much revenue.

Good news: The Florida Legislature decided that removing the one-year limit would not cost that much in revenue after all. CS/HB 7123 removed the one-year limitation. The governor signed the bill on May 15, 2019, and it became effective July 1, 2019.

Note: This new law only applies to homestead property, not to non-homestead property, transferred between spouses.

Note: The law still does not apply to gift transfers of encumbered real estate to others, such as to children.

Practice tip: If a lender requires the spouse, who is being added to the deed, to sign on to the mortgage note, a surtax may apply.

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