What Are the Real Tax Benefits of Moving to Florida, if Any?
Will you really save on federal, state and local taxes living in Florida? This article will provide some general information on what to consider when trying to determine what the tax benefits of moving to Florida may be, if any. DISCLAIMER: This article is not legal, tax or professional advice of any kind. For that, retain the services of a licensed professional.
Q) Will your “old” higher tax state still try to collect taxes from you?
A) Possibly. Since the state and local tax deduction was limited to $10,000, many high tax states have lost significant revenue because taxpayers moved themselves and their income to states with lower tax rates. You can’t blame higher tax states for wanting to make sure that residents have actually moved out, and didn’t just try to make it appear so to get out of paying the taxes they legally owe.
In New York State for instance, residents may need to prove they no longer live in the state and they don’t intend to move back.
In California and elsewhere, “moving” out of a state may subject someone to a residency audit, which is not cheap or fun.
What might cause you headaches if you’re selected for this scrutiny?
- Living in your new low tax state for less than 183 days a year. How could they possibly know that? By combing through your credit card and bank statements as well as other records. It would be hard to claim that you’ve lived in Florida for seven months out of the year, if your credit card statements show that you have put gas in your car and visited various restaurants every week in New York for any months during that time. Some states may count any days without proof otherwise, as days lived in your old state.
- You still own that Mansion in the high tax state while claiming that you live full-time in a small condo in Florida.
- You claim to live in Florida but your spouse lives in New Jersey or your children still attend school nine months out of the year in the state.
Q) Should I move to Florida because of the new federal $10,000 limitation on tax deductions for SALT (state and local taxes)?
A) If you currently live in a state with higher state and local taxes, and your goal is to solely to save on taxes, the answer is probably yes and can be confirmed simply by doing the math.
However, there are other issues to consider (discussed below), such as…
- Is saving money on taxes worth a major change to your current way of life?
- Convincing your “old” state that you no longer owe taxes to them may not be as easy as you think.
- What if you learn you really don’t like living in Florida?
- Will the political winds change in the future and reverse the new SALT deduction limitation and wiping out future tax savings gained by the move?
Q) Are state and local taxes really lower in Florida than the state you now live in?
A) Unless you live in Wyoming, South Dakota, or Alaska, you’ll be happy to know that the state you live in does have a higher overall tax burden than Florida according to information derived from the Tax Foundation. BUT read further…
Q) Is it possible that you may pay more taxes in Florida than where you live now?
First of all, let me say that this is not a post with a political agenda of any kind. It is not a post to declare that Florida’s tax system is unfair to some and is set up to benefit others.
The purpose of this post is to provide information that can help prospective new Florida residents gather facts to help them them decide if moving to Florida is a good decision or not.
Who Pays More of Their Money Towards Taxes in Florida?
Here’s what you can expect to pay to state and local governments as a resident of Florida as a percentage of your income according to a the ITEP*:
Your Annual Income in Florida
Less than $18,700 = 12.7% of your income paid in state and local taxes
$18,700-$31,400: 9.5% of income
$31,400-$49,500: 8.1% of income
$49,500-$86,500: 6.8% of income
$86,500-$197,700: 5.6% of income
$197,700-$548,700: 4.5% of income
Top 1% $548,700+: 2.3% of income
*According to the Institute on Taxation and Economic Policy
Q) What qualifies you as a Florida resident?
How long do you have to live in Florida to be considered a resident?
How do I establish residency in Florida for tax purposes?
A) Steps to take to help establish residency in Florida.
Retaining a Florida attorney before you move could save you money in the long run, especially if you feel your old state may find breaking up with you hard to do.
- Fill out and file a Declaration of Domicile in the Florida county you move to.
- If you own your Florida home, fill out and file an application for the Florida real estate homestead exemption. This document could not only help you show proof of where you now live but will also help you to qualify for all potential real estate tax breaks available by having your primary residence in Florida. The Florida Move Guide describes what types of properties qualify (and what doesn’t) before purchasing a home because the real estate tax savings can be significant.
- Get a Florida drivers license. This is required within 30 days of becoming a resident anyway to avoid fines and penalties.
- Register your vehicles in the state of Florida. You’ll need Florida titles to your vehicles and to obtain Florida auto insurance.
- Move your checking and savings accounts to local Florida financial institutions.
- Register to vote in your new location even if you’re someone who doesn’t always exercise your right.
- Consult with a Florida estate planning attorney because any will, trust and other documents drafted in another state might not comply with Florida law. Updating your estate plan according to Florida law will provide you with another form of proof that you’ve really moved to the state and intend to remain living there.
Q) Does Florida collect a death tax?
A) No. Florida does not currently collect a death tax like some other states do.
Q) Do you have to pay taxes on your pension in Florida?
A) No, if you move to Florida and become a resident of the state, you will not have to pay any personal state income tax on your pension to the state of Florida
Q) How much money will be taken out of my paycheck for Florida income tax?
Q) Could future tax changes affect what I’ll pay after I move to Florida?
A) Of course.
The new federal state and local tax deduction $10,000 limitation could be reversed.
Taxes in Florida could also increase making Florida less attractive from a tax savings standpoint in the near future.
Q) Even if you pay less in taxes, will you actually like living in Florida long term?
Why do so many people move out of Florida?
A) Everyone believes they will love living in Florida forever, but the number of people who move to the state only to eventually come to realize it was a mistake and move out, is surprisingly high.
Q) So the question remains, should you move to Florida because you’ll save money on taxes?
You’ll know after reading the Florida Move Guide.
Ron Stack “That Best Places Guy” of Zeus Press Inc