The beloved 1990s comedy The Big Lebowski is returning to Netflix on Saturday, June 1. Woohoo! And as usual, there’s plenty for us to learn. I promise, no spoilers but how can you have missed this movie?
A few years ago, the actor Jeff Bridges (who starred as The Dude in The Big Lebowski) and his sister were discovered to be renting out an inherited luxurious Malibu property for over $16,000 per week, and paying 1970s-level property taxes on the property. Known as the “Lebowski Loophole,” California was only state in the country where children got to inherit their parents’ low property taxes on the homes. Given the attention The Dude garnered, California just closed this gap and many, many, many people in California will see an increase in their property tax bill in 2021.
So, what about here in Florida, we never had this loophole and only have our homestead tax deduction to consider when it comes to State property tax laws. In the Sunshine State, a person may only have one homestead. So, if The Dude inherited his parent’s homestead and already had his own homestead, his property taxes will increase on the inherited property. If The Dude’s parent’s owned the house for a very long time, then the property taxes will go up a lot.
However, the income taxes from the sale of the house will not be too bad. There is an income tax concept called “step up in basis,” which means that instead of The Dude inheriting the house at his parent’s basis (the amount they paid for the real estate plus capital improvements), he’ll inherit the home at the value of the property on the date of his parent’s death. This is good because, for non-personal residences, income tax is due on the positive gain between the basis and the sale price.
To quote The Dude, “This is a very complicated case Maude. You know, a lotta ins, a lotta outs, lotta what-have-yous.” LOL call with any questions.
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