Are you one of the lucky Americans considering a move to the sunshine state? If so, you are not alone. Over the last decade, there have been more than 350,000 individuals annually who have changed their domicile to Florida. It’s not an easy decision to leave your home state and embark on the “sunshine and low taxes venture”; however, Florida flirts with many—and more often than not, wins them over.
Florida is a preferred destination for sunshine, amusement parks, some of the best beaches in the world—and no state income tax! Due to the numerous advantages, many people choose to make this great state their home. The intention to make Florida your permanent residence is called “domicile,” and it can have many perks.
Trading State Income Tax for Vitamin D?!
Let’s look at why savvy people such as yourself choose to domicile in Florida (did we mention the part where there is no state income tax?). I can’t stress this enough—at this time, our country is experiencing a rolling 12-month inflation that is now the highest it has been in 30 years. Not paying state income tax can make a critical difference in your financial well-being. Add to that the vitamin D you get each time you walk out the door, and it’s no wonder so many are unable to resist Florida’s incessant charms.
As a financial advisor with clients’ best interest always at the top of mind, I am always excited to share the news that Florida does not have a state income tax—and on top of that, sharing that Florida has no estate, gift, or inheritance tax as well. Many of my clients from Illinois and New York know all too well the impact some of these tax burdens can have on their legacy and livelihood. However, though Florida presents a strong case for domicile, you should still do a side-by-side evaluation with your accountant, attorney, and financial advisor.
Benefits Beyond Sunshine and Warm Breezes
Digging a little deeper to look at several benefits individually, we find that one of the most notable benefits of domicile is the homestead exemption. This gives you up to $50,000 exemption and limits your property value to be raised by only three percent per year, or the change in the Consumer Pricing Index, whichever is lower. This alone can result in savings of $750 annually and is portable if you later choose to move within the state. However, we have to be diligent and play an active role, as this benefit is not automatic. You need to have owned the home in the year you apply for this exemption by January 1 and apply by March 1. With this you also get Florida’s infamous Homestead Creditor protections. Please contact me or a professional for more details.
The perks don’t end there. For residents who have chosen Florida as their legal domicile, you are granted protections by state for annuities and life insurance cash value. So perhaps it’s time to calculate your “northern tax”—but beware and compare. Keep in mind that if you have income from a business or a rental property in a state with income tax, income tax in that state may continue, although some can be moved. A property may be placed into an LLC to change the character from real estate to an intangible property, but only in certain states.
Federally, the deduction for state and local taxes (SALT) is currently capped at $10,000.
5 Important Steps to Making Florida Your Home
If you are ready to make sunscreen and tax savings part of your everyday life, here are five steps you should take:
- File a Declaration of Domicile at your local courthouse.
- Change your motor vehicle registration and driver’s license.
- File for your Florida homestead exemption. Don’t wait too long in an environment where property values are still rising.
- You should also start cutting ties to your former domicile state. Make sure you execute or update your wills and trusts to make them current to Florida law.
- File a final tax return in your prior state and if you need to keep filing there, begin filing as a non-resident.
Other things you can do is find local doctors, attorneys, financial advisors, professional memberships, and even a new place of worship. Make sure to have your mail delivered to your Florida address and open a local bank account. Individuals have been audited by states that are losing income tax dollars by the day to our sunny state, so spend as much time as possible in this area. A general rule of thumb is to be here for six months plus one day. Finally, don’t forget to register to vote in Florida!
For a comprehensive list to help you with your decision to domicile, please reach out to me at: nazwoir@wintrustwealth.com. I am happy to be your resource as we welcome you to this sunny community.
Nina Azwoir, First Vice President of Investments, Wintrust Wealth Management. © Morningstar 2020. All Rights Reserved. Used with permission. This information may answer some questions but is not intended to be a comprehensive analysis of the topic. In addition, such information should not be relied upon as the only source of information, competent tax and legal advice should always be obtained.
Securities, insurance products, financial planning, and investment management services offered through Wintrust Investments, LLC (Member FINRA/SIPC), founded in 1931. Trust and asset management services offered by The Chicago Trust Company, N.A. and Great Lakes Advisors, LLC, respectively. Investment products such as stocks, bonds, and mutual funds are: NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE | NOT A DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY.