In addition to the weather, there are many financially compelling benefits that Florida provides to its residents. First, and perhaps the most widely known, is the income tax benefit. Florida does not assess a state income tax on its residents (unlike many of the states in the northeast). This relief is one of the driving factors for the southern migration.
Furthermore, just like Florida does not have a separate state income tax, Florida does not assess a separate state estate tax on its residents. In contrast, many states do impose such an estate tax with exemption thresholds far lower than the federal estate tax exemption amount of $5,450,000 (in 2016 and indexed for inflation). Although, it is important to note that if you own property in another state, that state may assess an estate tax on said property. With proper planning said state estate tax may be able to be avoided.
As a caveat to the above mentioned income and estate tax benefits, a Florida resident must be sure to actually spend the majority of his or her days of a year in Florida (typically 183). Otherwise, your former state may assess income and/or estate taxes upon you. There are certain actions that one can take to validate their Florida residency status. Some of the ways to prove residency include, but are not limited to, filing a declaration of homestead, obtaining a Florida driver’s license, registering to vote, and revising estate planning documents to state that you are a Florida resident.
Aside from being tax friendly, Florida is also a great state for asset protection. Florida’s most significant form of asset protection is through its homestead laws. Homestead protection, for those who elect it, protects Florida residents from losing their “homestead” or primary residence to a creditor. However, this does not protect a homeowner from IRS tax liens or liens related to the financing of the homestead property. Florida also offers additional asset protection on all forms of property held as tenants-by-the-entirety (see blog post May 3, 2016), life insurance and annuity contracts, IRA’s and 529 college savings accounts (see blog post June 9, 2016).
In summary, establishing Florida residency is not only a lifestyle change (throw away those snow shovels) but also an opportunity to alleviate significant and unnecessary financial stress for the remainder of your life.