Reasons to Become a Florida Resident
With many states struggling to collect revenues and, in turn raising tax rates, the well to do, and even the not so well to do, are looking for ways to minimize their income tax bills. In addition, many of the states with income taxes also collect a state death tax.
These two things coupled together - state income taxes and state death taxes (think about Connecticut , Illinois, Maryland, Massachusetts, New Jersey, New York and Pennsylvania) - or even just one of them (think about California, which has the highest personal income tax rate at 13.3% but no state death tax) are huge incentives for the wealthy to look for a more desirable (as in less taxing) place to call home.
5 Advantages of Becoming a Florida Resident
Florida is a state that is frequently mentioned when the wealthy are looking to make a move to a less taxing state. But the absence of taxes is not the only reason Florida is such an attractive place for the well to do to move. Couple beautiful beaches and temperate weather with the following five things and Florida stands out as a place for the well to do, as well as the not so well to do, to call home.
- Florida doesn't collect an individual income tax. This list does start off with a tax benefit of becoming a Florida resident because to the wealthy this is a big deal. Florida is one of only seven states that don't collect an individual income tax at the state level (the other six are Alaska, Nevada, South Dakota, Texas, Washington, and Wyoming). Moving to Florida from a state like New York can save someone in a high-income tax bracket thousands or even millions of dollars in taxes. In addition, the prohibition against collecting an individual income tax is part of the Florida Constitution, so Florida won't be imposing a state individual income tax anytime soon.
- Florida doesn't collect a state death tax. The second item on the list also deals with taxes because, again, taxes are a big deal to the wealthy. While Florida used to collect a state estate tax in the form of a "pick up tax," changes in federal laws phased out the pick up tax in 2005. As a result, many states took steps to keep the state death tax revenues flowing, but the Florida Constitution prohibits the imposition of a state death tax, so Florida won't be collecting one anytime soon. Moving to Florida from a state like Massachusetts or New York can save a family thousands if not millions of dollars in state death taxes.
- Florida offers many asset protection benefits. Many of the wealthy, as well as the not so wealthy, are in fear of losing their assets to a creditor or a lawsuit. Florida offers many asset protection benefits, including homestead creditor protection; tenancy by the entirety for real property as well as personal property; protection of the cash value of life insurance; protection for IRAs and annuities; and protection of assets held in a properly structured business entity.
- Florida offers property tax benefits for a primary residence. If you buy a home in Florida and declare that it is your primary "homestead" residence, then, aside from the asset protection benefits mentioned in #3 above, you will also receive two property tax benefits. First, you will receive an exemption for the first $50,000 of value for property tax purposes (except for school district taxes which only receive a $25,000 exemption). Second, which is of great benefit as your homestead residence increases in value the more years that you own it, is the "Save Our Homes" cap on annual assessments.
The cap is set at the lower of 3% or the change in the Consumer Price Index (CPI), which means that the assessed value of your homestead for property tax purposes cannot increase on annual basis by more than the change in the CPI or 3% if the change in the CPI is more than 3%. For example, in 2013 the change in the CPI was only 1.7%, so the 2013 assessed value of a homestead residence cannot increase by more than 1.7%, while in 2008 the change in CPI was 4.1% but the increase in the assessed value was capped at 3%. This is a big deal if you plan to stay in your homestead for many years - as the property's value increases over the years, you will be building equity that in essence will be sheltered from increases in property taxes.
- Florida is home to many top wealth strategists, tax advisors and estate planning attorneys. Because Florida is such an attractive state for the wealthy to call home, it is also home to many top wealth strategists, tax advisors, and estate planning attorneys. These advisors are creative and proactive in assisting their clients with growing wealth, minimizing taxes, avoiding probate, keeping clients' final wishes private (compare New York resident James Gandolfini, whose final wishes are known to the world, with Florida resident George Steinbrenner, whose final wishes are a private family matter), and creating an ongoing legacy.
Should You Become a Florida Resident?
Becoming a Florida resident is actually quite easy since Florida will be happy to have you. The more difficult part will be cutting all, or at least the right number, of ties to your former state of residence to convince the state revenue department that you are no longer living there and, therefore, can't be taxed there.
This is particularly important for someone who maintains a home or a business in a state other than Florida. To learn what steps should be taken to make your move to Florida a permanent one, refer to How to Become a Florida Resident, Officially.