People have been relocating to Florida enjoy the lifestyle and to save on their taxes for years. However, the recent changes in the federal tax code, which include new limits on deductions of state and local taxes paid, have made the tax benefits of being a Floridian even greater.
Here are some of the top financial advantages of changing your primary residence to Florida:
- Florida Does Not Collect an Income Tax. It is one of only 7 states in the US that do not collect income tax. For those in a high tax bracket coming from high tax states such as CT, NY, or MA, the difference in total taxes paid can be significant. The Florida Constitution specifically prohibits the state, counties, and municipalities from collecting income tax, so any change to that law would require a constitutional amendment.
- Florida Does Not Collect a Estate or Inheritance Tax. Florida residents do not need to worry about a state estate or inheritance tax, which is a tax that is levied on people who either own property in the state where they died (estate tax) or inherit property from a resident of a state (inheritance).
- Florida Offers Many Asset Protection Benefits. You shouldn't have to worry about losing your assets to a creditor or in a lawsuit if you live in Florida. The state offers many asset protection benefits, including:
- Homestead Creditor Protection -The Florida Homestead provides an exemption from a forced sale of the property to pay certain creditors. The Homestead exemption does not apply to sale for debts from property taxes, mortgages, construction liens, vendor’s liens or special assessments. The Homestead is only protected up to a certain amount of land (1/2 acre within a municipality). Anything over this amount can be forced to be sold by creditors.
- Tenancies by the Entirety for real property and personal property
- Protection of the cash value of life insurance
- Protection for IRAs and annuities, and
- Protection of assets held a properly structured business entity.
Florida Offers Property Tax Benefits for Primary Residences. There are two property tax breaks if you buy a home in Florida and declare that it's your primary "homestead" residence. First, you'll receive an exemption for the first $50,000 of your home's value for property tax purposes, except for school district taxes which only receive a $25,000 exemption. In Addition, the Florida "Save Our Homes" cap on annual assessments. The cap is set at 3 percent or the change in the consumer price index (CPI), whichever is less. This means that the assessed value of your homestead for property tax purposes can't increase on annual basis by more than the change in the CPI or 3 percent if the change in the CPI is more than 3 percent.
How Hard Is It to Become a Florida Resident? It is not difficult or complicated to become a Florida resident. The most difficult part is cutting ties to your former state of residence to convince that state's revenue department that you're no longer living there and therefore can't be taxed there.
This is particularly important for someone who continues to maintain a home or a business in another state while residing in Florida.