Mortgage Taxes in Florida: 101

By Michael Iakovou and Olivia Piluso

When a mortgage is recorded in Florida, the mortgage may be subject to mortgage taxes imposed by the state. Florida imposes two separate taxes on a mortgage securing real property in Florida:

1. A documentary stamp tax at the rate of $0.35 per $100.00 (rounded up to the nearest $100.00) of the secured amount; and
2. A nonrecurring intangible tax (intangible tax) at the rate of $2.00 per $1,000.00 of the secured amount.

The documentary stamp tax and the intangible tax apply to both commercial and residential transactions.

Documentary Stamp Tax on Notes and Mortgages

The first type of tax that Florida imposes on a mortgage securing real property is a documentary stamp tax. What is a documentary stamp tax? A documentary stamp tax is an excise tax levied on specific instruments, including:

1. Promissory notes and other written obligations to pay money; and
2. Mortgages, trust deeds, security agreements or other evidence of indebtedness recorded in Florida.

The amount of tax is evaluated based on the indebtedness evidenced by the promissory note, recorded mortgage, or another recorded instrument. The maximum amount of documentary stamp tax that must be paid on an unsecured promissory note is $2,450.00. A documentary stamp tax is paid when the promissory note is secured by a mortgage recorded in Florida, and the mortgage is recorded in the county clerk’s office. Furthermore, the promissory note must include a notation on the note indicating that the required documentary stamp tax has been paid on the recorded mortgage.

Special rules for payment of the documentary stamp tax apply if the note and mortgage are given in conjunction with a sale by a developer of a timeshare interest in a timeshare plan. In addition to special rules, there are some exemptions for documentary stamp tax, which are:

1. Certain renewal notes;
2. Certain taxpayers, including any obligation to pay money issued by a municipality, political subdivision or agency of Florida;
3. Notes or other written obligations give in connection with a wholesale warehouse mortgage agreement if the required documentary stamp taxes are paid on the underlying collateral obligation;
4. Specific types of bond financing issued by the State of Florida or any of its municipalities; and
5. Certain notes and mortgages issued under a confirmed bankruptcy plan.

Intangible Tax on Note and Mortgages

The second type of tax that Florida imposes on a mortgage securing real property is a nonrecurring intangible tax. What is an intangible tax? An intangible tax is a one-time tax on promissory notes, bonds and other obligations for the payment of money that is secured by a mortgage on real property in Florida. Specific apportionment rules may apply if the obligation is secured by real property or personal property outside of Florida and in Florida, and personal and real property located solely in Florida. Generally, the tax must be paid before the recordation in the county clerk’s office; however, special rules apply if the mortgage is not recorded, or if the mortgage is given in conjunction with a sale by a developer of a timeshare interest in a timeshare plan. The exemptions from the payment of the intangible tax are primarily for intangible personal property owned by certain tax players, specific types of bond financing, and certain notes and mortgages issued under a confirmed bankruptcy plan.

Future Advances

In Florida, future advances under a loan may be secured by a mortgage, and they retain the same priority as the initial loan advance if:

1. The mortgage expressly states that it secures future advances;
2. The future advance is made within 20 years from the date of the mortgage; and  
3. The future advance does not cause the loan amount to exceed the maximum amount stated in the mortgage.

Documentary Stamp Taxes and Future Advances  

As it relates to documentary stamp taxes, when the recorded mortgage secures future advances, the documentary stamp tax is only required to be paid on the initial debt secured, excluding future advances. The taxes on the future advances must be paid when any future advance is made. Failure to pay the required documentary stamp tax relating to any future advance does not affect the lien of the mortgage. However, the mortgage is not enforceable as to the future advance until the required documentary stamp tax is paid. The failure to pay the documentary stamp tax is considered a first-degree misdemeanor and is punishable by up to one year in prison.

Intangible Taxes and Future Advances

As it relates to intangible taxes, if the mortgage secures future advances, the intangible tax is only required to be paid on the initial obligation, excluding future advances. Intangible tax on future advances must be paid when the future advances are made. If an individual fails to pay intangible taxes, then it is considered a third-degree felony and is punishable by up to five years in prison.

Assignment of Mortgage

Assignments are generally exempt from documentary stamp taxes unless it is given as collateral security for a new loan.[1] Furthermore, assignments are exempt from intangible taxes if the required intangible tax has been previously paid on the underlying note.

Note and Mortgage Assumption

A note and mortgage assumption occurs when a new borrower assumes an existing borrower’s obligations under an existing note and mortgage. The assumption by the new borrower is considered a renewal or modification of the obligation under the existing note and mortgage. As such, the party assuming the mortgage will have to pay the documentary stamp tax. Conversely, no additional intangible tax is due on the note and mortgage assumption if the required intangible tax has been previously paid on the assumed obligation and the amount of indebtedness being assumed has not increased.

Guaranty Mortgages

With regards to guaranty mortgages, in cross collateralized loans there are usually multiple borrowers that are required to guaranty repayment of the loans. To carry out this cross collateralized structure, the lender often requires a guaranty from each borrower guarantying repayment and a mortgage from each borrower securing its guaranty obligation. A guaranty mortgage securing a guaranty is usually exempt from intangible tax because the guaranty is considered a contingent obligation; however, intangible tax is imposed if the guaranty mortgage secures both the guaranty and the primary note obligation (See § 201.08(7) Fla. Stat.).  

Exempt Renewal Notes

Under Florida law, certain notes and mortgages that are refinanced and renewed are exempt from documentary stamp tax and intangible tax. For example, a renewal note may be exempt from documentary stamp tax and intangible tax.

A renewal note may be exempt from documentary stamp tax if it evidences part, or all, of the original indebtedness evidenced by the original note being renewed.  This only extends or continues the original obligation without enlarging it.[2] Furthermore, a renewal note may be exempt from the documentary stamp if the note does not add any new obligors (See § 201.09 Fla. Stat.).

In a scenario where intangible tax has been paid and is then refinanced, the refinanced note is exempt from intangible tax if the principal balance does not exceed the unpaid principal balance of the original obligation at the time of refinancing; however, intangible tax is due if the principal balance of the new obligation exceeds the principal balance of the original obligation at the time of refinancing. (§199.145(4)(a), Fla. Stat.).

Multistate Apportionment

Under Florida law, in a multistate transaction, there are a few ways to reduce mortgage taxes. Two of such ways include (i) using specific apportionment rules to calculate the taxable base that is subject to the documentary stamp tax and intangible tax, and (ii) limiting recovery under the mortgage to an amount that is less than the full amount of the debt secured.

For more information on mortgage taxes in Florida, or to discuss your particular real estate venture in Florida, contact us at (646) 766-8308 or email info@kilegal.com to discuss.  

[1] An assignment of mortgage is when one lender transfers the mortgage/security instrument to another lender.

[2] If the renewal note evidences a term obligation, it must renew and extend only the unpaid balance of the original obligation; or if the renewal note evidences a revolving obligation, it must renew and extend no more than the original face amount of the original obligation.

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