By Gene K. Glasser, Esq.
In the event a Florida domiciliary owns their residence, they are entitled to the homestead exemption. The homestead exemption will save taxes on an annual basis. The primary benefits of the homestead exemption are twofold. First, in determining the amount to be assessed on the property there is deducted $50,000.00. Assuming a 2% real property tax that will save the resident approximately $1,000.00 a year. The amount of savings is determined on the millage that is applied to the $50,000.00. Second, based on the constitutional change, “Save Our Homes,” the annual assessed value of the residence can only increase by 3% a year. Therefore, when real estate values increase by 3% or more, there is a cap of 3% on the increase on an annual basis. Over a protracted period of time, the real estate market generally increases more than 3% on an annual basis and therefore there will be significant savings based on the cap on the annual increases.
Assume an individual lives in New York City and there is an 8% income tax. New York also has its sales tax which is significantly more than the general sales tax in Florida of 6%. New York also has real property taxes and other taxes. If an individual has IRA distributions of $30,000.00 and interest amount of $70,000.00, but have $100,000.00 worth of income that would be subject to income tax in New York. Therefore, there would be an $8,000.00 tax. On the other hand, if the individual is a resident and domiciliary of the State of Florida, then there would be no income tax on the IRA distribution and the interest income.
Generally, all dividends, interest, IRA distributions, pension payments, are taxed in your domiciliary state where you permanently intend to reside. Taxes are paid in each of the states where wages are earned and on rental income of that jurisdiction. By way of example, if a Floridian works three months a year in New Jersey and earns $30,000.00 then that $30,000.00 would be subject to New Jersey State income tax. If an individual is a Florida domiciliary and resident and owns significant stocks, bonds, retirement plans, but has a piece of rental property in Pennsylvania, then the only tax to be paid in Pennsylvania would be based on the rental income in that jurisdiction. The interest, dividends, and Pension or IRA distribution would not be taxed.
In the event a domiciliary and resident in the State of Florida does not have wages or rental income in another jurisdiction then there are no filing requirements in any other jurisdiction. If there are wages or rental income in another jurisdiction then generally if that state has an income tax there would be the requirement to file a non-resident income tax return which would only include the rental and wage income but not other sources of income.
Florida does not have an estate or inheritance tax. However, many of the states have estate or inheritance taxes. A Floridian would generally not be taxed in another jurisdiction unless they have real property in that jurisdiction. Assuming a Floridian passes away and has a significant portfolio of stocks, bonds, and other assets. However, they have a piece of property in Chicago, Illinois. There may be an estate tax attributable to that piece of property in Chicago, Illinois but not the Florida residence, stocks, bonds, IRA’s, mortgage receivables, and other similar assets.
In order to become a Florida resident it must appear that it is your intent to permanently reside in the State of Florida. Intent is a subjective requirement. However, the intent is generally demonstrated by objective manifestations. Therefore, in order to establish yourself as a Florida resident it is advisable to consider the following:
File an Affidavit of Domicile. This is a statement that you’ve changed your jurisdiction from another state to Florida. It lists the former residence and your new residence address.
Register to vote in Florida.
Vote in Florida.
Change your driver’s license to Florida.
Change your license plates to Florida.
File your Federal Income Tax Return 1040 in the Florida service center which is in Georgia.
Change the address on your 1040 to reflect your Florida address as your residence.
In the event you have a requirement to file tax returns in the other jurisdictions because of wages or rental real estate, file a non-resident tax return.
Claim the Florida Homestead Exemption if you own your residence.
Join local clubs or organizations.
Change your estate planning documents to reflect you are a Floridian.
To the extent possible, move most of the assets to Florida.
Spend as much time as you can in the State of Florida.
Have your mail, magazines, subscriptions, and other literature sent to the State of Florida.
Hire Florida professionals, i.e., accountants, lawyers, physicians, veterinarians.
In Florida, there are a significant number of snow birds. Many of those individuals can choose between Florida and their original home jurisdiction as their domicile. From an asset protection viewpoint, Florida has many more exemptions than other jurisdictions. There can be significant annual tax savings by changing from a former jurisdiction where there are either large income taxes, whether it be state, county or city, or estate or inheritance taxes, by the same jurisdiction. The original jurisdiction can be the vacation home of the summertime. However, if you follow most of the guidelines set forth above in changing your domicile residence to the State of Florida, you should be treated as a Floridian and not a citizen of the other state.
Gene K. Glasser, Esq. is a managing shareholder at Greenspoon Marder, where he focuses his practice in the areas of Tax, Trusts & Estates; Corporate & Business; Wills; Guardianship; and Probate. Mr. Glasser is Board Certified by the Florida Bar in the areas of Estate Planning and Administration. He can be reached at [email protected]
