FLORIDA TAX AND HOMESTEAD BENEFITS
You may be wondering:
- Whether you should become a Florida resident, and if so; and
- How you should go about doing so…
If so, read on.
As you may have heard, Florida is one of the friendliest states in the United States when it comes to taxes and asset protection. Florida has three primary benefits:
- The Florida Homestead Exemption;
- No Personal Income Taxes; and
- No Estate or Inheritance Tax.
Several northern states are actually increasing the tax burdens on their residents, while Florida continues to welcome new residents with open arms, and the incentives are always growing here!
FLORIDA HOMESTEAD BENEFITS:
The first major benefit is the homestead protection provided in the Florida Constitution. The protection of homestead property operates in many ways.
- The homestead avoids probate and is generally exempt from creditor claims following death of the owner;
- The residence is usually completely shielded from creditors during the owner’s lifetime. This is especially useful during difficult economic times; and
- Florida has a provision in its Constitution (known as the “Save our Homes Amendment”), which limits increases in the assessed value of homestead property, thereby capping annual real estate taxes that can be levied against the homestead. With this protection, a primary resident will not be subject to the whims of local government or the property appraiser when either chooses to significantly increase the market value of your residence for real estate tax purposes.
NO PERSONAL INCOME, ESTATE OR INHERITANCE TAXES:
Another major benefit of being a Florida resident is that Florida does not have any individual income, estate or inheritance taxes. Only a very few states can say this. Not only is the savings reflected in the amount of income taxes paid, it’s much less cumbersome to process paperwork at tax time. The Constitutional prohibition against an estate tax in Florida is also a rarity among states. What is earned during one’s lifetime can be accumulated and given to their family following their passing, as opposed to being paid to state government in the form of estate, inheritance and death tax. Finally, Florida repealed its former tax on intangible personal property, such as shares of stock and securities. When all these tax savings are pooled together, you can see a very significant savings over your lifetime.
For decades, Florida has been consistently anti-tax, and it doesn’t look like it will change any time in the near future. With the federal government possibly increasing federal taxes and capital gains tax, a move to Florida could easily offset the increases.
HOW TO OBTAIN THESE BENEFITS:
First, you must establish residency in Florida; by lease or purchase and must actually reside in the residence for at least six months. Next, we would recommend twenty-one steps to establish change of domicile. At the top of the list, is (1) obtaining a Florida Driver’s License; and (2) registering to vote in Florida.
If the Florida residence is owned (and not leased), the owner should also file for the homestead real estate tax exemption. There are many estate planning implications to having a Florida Homestead. We would also recommend speaking to knowledgeable counsel familiar with Florida’s unique homestead laws.
To take advantage of Florida’s residency benefits, you must make Florida your home. The more difficult task is actually the move out of your current state. Extracting oneself from a state which has a state income, estate or inheritance tax if often times not easy. You must make sure that any visits back to your current state do not trigger those states’ taxes. If you visit there for any more than 183 days per year, you may still be subject to the residential income taxes imposed by that state; even if Florida does recognize you as a Florida resident.
BIFURCATION OF DOMICILE:
If you are married and uncertain whether you, your spouse or both of you should take advantage of Florida’s tax savings and creditor protections, there’s an immediate option available. One of you may decide to make Florida your domicile, so that the other may remain domiciled elsewhere. However, it’s more than likely that once one spouse experiences the benefits of Florida living, and the tax advantages, the other spouse will follow within a short time.
The concept of change of domicile to Florida is relatively simple, however, it is suggested that you consult with attorneys and tax and estate planning professionals when you begin the process; both in your home state, as well as in Florida. There are certain deadlines and processes that you will likely need guidance with.