The Honest Broker: Benefits of Becoming a Full-Time Florida Resident
Becoming a Florida resident is not difficult or complicated.
The most difficult part would most likely be cutting ties to your former state of residence to convince that state’s revenue department that you’re no longer living there. If you’re not living there, you 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.
Individuals are often looking for ways to minimize their tax obligations. It can provide a huge incentive for individuals to look for a more desirable and less taxing place to call home when these taxes start adding up—someplace like Florida. The state offers a few other benefits as well. Florida’s homestead exemption is said to be one of the best in the country.
NO State Income Tax
Florida is one of only 7states that doesn’t collect an individual income tax. Moving to Florida from a state like New York can save someone in a high-income tax bracket many thousands of dollars each year in taxes. The prohibition against collecting an individual income tax is part of the Florida Constitution. A constitutional amendment would be required to change this provision.
NO Death Tax
Florida used to collect a state estate tax in the form of a “pick-up tax,” but changes in federal law phased this provision out in 2005. Many states took steps to keep the state death tax revenues flowing through a process known as “decoupling,” but not Florida. The state’s constitution also prohibits the imposition of a state estate tax
Asset Protection Benefits
There are protections of your assets from a creditor or a lawsuit if you live in Florida, including that a creditor can’t claim your home to satisfy a debt unless it’s the mortgage lender who holds the property as collateral for the loan. This prohibition applies to your spouse’s creditors as well, as long as you’re not also contractually liable for the loan. Creditors can’t touch property or assets that are also owned by your spouse.
Property Tax Benefits
There are two property tax breaks if you buy a home in Florida and declare that the residence is your primary “homestead. Example; 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. There’s also the Florida “Save Our Homes” cap on annual assessments. The cap is set at 3% or the change in the consumer price index (CPI), whichever is less.
The CPI is effectively a year-to-year comparison of prices paid by urban Americans for goods and services. This can be a significant bonus if you plan to stay in your homestead for many years. A property’s value typically increases over time, so you’ll eventually reach a point where its assessed value is more, perhaps significantly more than when you purchased it. Property taxes are a percentage of this value. The Save Our Homes cap effectively lets you build equity each year that will be sheltered from taxes.
Stay well and stay healthy!
Diane Lott, Broker
Owner: Paradise Found Realty
Paradise Found Realty, Inc. of Palm City
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