03 Feb Items to Consider When Relocating to Florida for Tax Benefits
As a result of the COVID-19 pandemic, many are discovering that working from home can be a viable and long-term option. With this realization, individuals have started to ask themselves “why am I residing in an area with a high cost of living, or in a state which collects state income taxes, and why should I subject myself to cold weather that I do not like?” Soon thereafter, many of these individuals make the decision to relocate to cities, states, and geographic regions that can provide positive solutions to each of these questions – and Florida has become a very popular choice.
Tax benefits are a major reason for the mass migration to the Sunshine State. Florida residents do not pay state income or inheritance/estate tax and can receive various tax exemptions including a homestead exemption up to $50,000 on a primary residence.
If you are thinking about moving to Florida for the tax benefits, understand that there is no conclusive test to determine state domicile. However the more steps you take to show you are no longer living and connected with your current state, the more likely you will be able to take advantage of the Florida benefits. Here are some recommended actions to take when trying to establish Florida residency:
• File a Declaration of Domicile
• Register to vote
• Obtain a Florida driver’s license
• Register your automobiles and other assets like boats, motorcycles, and RVs
• Update your will and estate plan – Hire Florida professionals (CPA, attorneys, etc.)
• Notify tax officials and any entities to your corporate stocks or partnerships of your change in residence, and file final income tax returns in any states where you are required to pay income tax
• Be physically present in Florida for a minimum of 183 days a year
Yet, even if you do all the above, the key question for state income tax purposes (and to survive scrutiny from your former state taxing authority) is where do you earn your income and/or where do you maintain your life? The state where you previously paid your income tax may investigate things such as where you attend church, your club membership, and other indications of community involvement. Therefore, it also recommended you update your:
• Credit card billing address
• Health and vehicle insurance
• Banking items including address on checks
• Highway toll pass
• TV/Phone connections
• Local newspapers
• Gym membership
• And don’t forget your pets – find a new veterinarian in your new state of residency
Even pets, can play a role. In the Matter of the Petition of Gregory Blatt, decided by the State of New York Division of Tax Appeals on February 2, 2017, Blatt’s dog was responsible for saving him more than $400,000 in New York State income taxes. While Blatt had previously undertaken many of the steps necessary to change domiciles, the New York State Administrative Law Judge hearing the case on appeal determined that his change of domicile was effectively completed when he moved his dog.
KEGA Can Assist You
We suggest that you have a clear understanding of your previous state’s requirements to file a nonresident tax return and/or pay income tax on income sourced there, particularly if you continue to maintain sources of income and property in your previous state of residency.
Contact Kmetz, Elwell, Graham & Associates to review your personal situation regarding taxes and Florida residency.
This article is not tax, legal or other professional advice. Consult with a retained tax and/or legal professional for specifics regarding your individual needs and requirements.
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Messina is the Firm Administrator at Kmetz, Elwell, Graham and Associates and a blog contributor in the accounting and HR industries.