What are the income tax benefits of moving to Florida?

People move to Florida for an array of reasons. Whether to visit the beaches and the parks, to retire or just to escape the cold weather for a few months. The state has a lot to offer. But these are not the only things drawing people to the state. Florida is one of only a handful of states that does not impose state and local taxes on individual income. All of these factors are probably why Florida is among the top 5 fastest growing states in the country. With the passage of the Federal Tax Cuts and Jobs Act in 2018, which now caps state and local tax deductions on federal taxes at only $10,000, more people are expected to flee high tax states, such as New York, New Jersey, and Connecticut, to seek the relief that tax friendly states like Florida have to offer.

Once you move to Florida the question becomes, how do you start benefiting from the state’s tax policies? What if you have other homes outside of Florida and split time between states? The answer to these questions has to do with residency, as states can impose income taxes on individuals who are residents of the state.

How do you become a Florida resident for tax purposes?

You must establish domicile in the state. Domicile is the place where you have your permanent home which you intend to maintain as your permanent residence. Establishing domicile in Florida depends on the quality and quantity of your contacts with the state; what is your relationship with the state. There are several actions you can take to establish domicile in Florida. Some of the most common actions people take include:

  • filing a Florida Declaration of Domicile in the Office of the Clerk of the Circuit Court where you intend to reside;
  • applying for a Homestead property tax exemption;
  • changing your address with the Social Security Administration to your Florida address;
  • changing your mailing address to your Florida address;
  • obtaining a Florida driver’s license;
  • registering your vehicles with the Florida Department of Motor Vehicles;
  • registering to vote in Florida;
  • opening local bank accounts;
  • filing future income tax returns using your Florida address;
  • and updating your estate planning documents, such as your Wills and Trusts, to reflect Florida’s unique laws.

The more of these actions you take, the better your chances are that Florida will be considered your domicile, and not the state that you are leaving.

Further, you can only have one domicile, which means you will also need to abandon your domicile in your former state. This is especially important if you are keeping your home in your former state and plan on living there for part of the year. Doing this varies from state to state, but it generally requires that you give notice and show proof to your former state that you have established domicile in another state. That is why the more contacts you have in Florida, the easier it will be to prove your new domicile.

If you intend to keep a home your former state, you should bear in mind that about half of the states, mostly the high tax states, will still consider you a resident for tax purposes if you live in the state for more than 183 days a year. These states routinely conduct residency audits on those who still live in the state for part of the year, so keeping documentation regarding your time spent in each state is important. It is also important to remember that states can still impose taxes on any income that you generate within the state’s borders even if you are not a resident of the state.

Moving to Florida can be a huge financial benefit from a tax standpoint. It is a good idea to consult a tax professional for a more personalized look into this topic.

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