Moving to Florida Can Mean Big Tax Savings!
The combination of warm weather and no state tax makes Florida a desirable place to relocate. White sand beaches and tax incentives have people turning to the Sunshine State. And not just the traditional retirees—remote workers nowhere near retirement are also making the move.
But why Florida?
Florida is one of nine states that do not have a personal income tax. It also does not have an estate tax or an inheritance tax. No portion of what is willed to an individual goes to the state. Floridians no longer need to pay taxes to the state on intangible goods, such as investments. It’s corporate taxes are low compared to those of New Jersey and New York.
The 2017 federal tax law, which reduced the amount of state and local taxes that high-income earners can deduct on their annual taxes, fortified Florida’s tax advantages.
According to Miami’s Downtown Development Authority, a person who makes $1 million a year pockets about $640,000 in Miami vs. $535,000 in New York, after taxes.
Tax Advantages
Individuals are often looking for ways to minimize their tax obligations. It can provide a huge incentive for individuals to look for a more desirable and less taxing place to call home when these taxes start adding up—someplace like Florida. The state offers a few other benefits as well. Florida's homestead exemption is said to be one of the best in the country.
Some locations in the United States exempt a percentage of a home’s value. However, Florida law excludes a specific dollar amount under the homestead tax exemption. The homestead exemption in Florida is a state law, which means it’s the same no matter where you live.
You could claim up to a $50,000 homestead exemption on your primary residence. The first $25,000 of the exemption applies to all taxing authorities. You can get an additional $25,000 exemption that excludes school taxes if your assessed value is more than $50,000.
Property Tax Exemptions
Widow(er) Exemptions of $500 are available to widows and widowers who have not remarried. If you were divorced at the time of your ex-spouse's death, you do not qualify for this exemption.
Senior Citizen Exemptions are available in http://dor.myflorida.com/dor/property/forms/current/dr501sc.pdf certain counties and cities only. They are valued up to $50,000 for residents 65 years old and older who have gross income below $20,000 in 2001 dollars, adjusted for inflation. This exemption is in addition to the Homestead Exemption.
Blind Person Exemptions of $500 are available to Floridians who are legally blind.
Total and Permanent Disability Exemptions are available for homeowners who have a total and permanent disability. Quadriplegics who use their property as a homestead are exempt from all property taxes. Others who must use a wheelchair for mobility or are legally blind and have a gross income below $14,500 in 1991 dollars, adjusted for inflation, can be exempt from all property taxes as well.
Veterans Exemptions exist in a number of different forms.
A veteran documented as disabled by 10% or more in war or service-connected events can earn an additional exemption of $5,000 on any owned property.
An honorably discharged veteran who is totally and permanently disabled or requires a wheelchair for mobility due to their service can be exempt from all property taxes. In some circumstances, this benefit can be transferred to a surviving spouse.
An honorably discharged and disabled veteran who is 65 or older who was a Florida resident when they entered military service may be eligible for an additional exemption. The disability must be permanent and must have been acquired as a result of the military service. The property tax will be discounted based on the percent of the disability.
Members of the military deployed during the last calendar year can receive exemptions based on the percent of time during the year they were deployed.
But to see these tax benefits, one has to officially change their state of residence.
Become a Florida Resident
Becoming a Florida resident is not difficult or complicated. It's just a matter of taking some basic steps. The most difficult part would most likely be cutting ties to your former state of residence to convince that state's revenue department that you're no longer living there. If you're not living there, you can't be taxed there.
Where is Your Domicile?
When making the move to Florida, your goal is to establish Florida as your domicile, or your permanent home. The “facts and circumstances” behind your move to Florida plays a key factor when proving that you’re a Florida resident in the event of a state residency audit.
Although you may own more than one home, you only have one domicile. What does that mean? It’s the place a person calls home and intends to reside indefinitely—and whenever the person leaves that home, where he or she intends to return.
Because establishing domicile can be ambiguous at times, states may take a hard look at several factors. They consider the size and nature of use of your home, where is your time spent, your business involvement, your personal connections, and location of items “near and dear” to you.
There are also some additional ways to document your domicile in Florida including filing a declaration of domicile at your county office, obtaining a Florida driver’s license, registering to vote in Florida, and several others.
Relocating to Florida may sound dreamy—white sand beaches and tax breaks are a great combination. However, it takes some careful planning and strategy to avoid an unexpected tax bill. Consulting with an experienced tax professional is a helpful step before making any plans.
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