Shifting to the Sunshine State: Change of Domicile Planning Issues | Bilzin Sumberg
Florida has long been known as a hotspot for retirees and snowbirds to get exercise because of its sunny weather and beautiful beaches. In recent years, however, there has been an influx of individuals and families who have moved to the Sunshine State for tax purposes since the SALT Deduction Cap established by the Tax Reduction and Employment Act (“TCJA”) of 2017. As remote working has become the new “norm” since the COVID-19 pandemic, the increased flexibility in remote working has given people from high-tax countries such as New York and California the ability to seamlessly move to Florida. In addition, high-tax countries continue to propose raising taxes to address budget deficits exacerbated by the shutdown of the COVID-19 pandemic.1 According to the US Census Bureau, the states with the largest population declines in 2019-2020 were indeed new York, Illinois, and California, while North Carolina, Florida, and Texas saw the largest population increases. 2
Prior to the TCJA, taxpayers were granted unlimited deduction from their income tax returns for state and local taxes paid. The TCJA limited SALT deductions for the 2018-2025 tax years to $ 10,000 for individual taxpayers and married couples filing together. Last month there were proposals to include the lifting of the SALT trigger cap in the next COVID-19 relief package. However, the latest bailout package signed by the president last week does not address the lifting of the SALT withdrawal cap. Accordingly, the SALT deduction cap will remain in place for now, and coupled with increased tax proposals, Florida will continue to be an attractive residency alternative for individuals who find it too expensive to live and own property in high-tax states like New York, California, and Connecticut.
Tax perks Florida residents enjoy include: no state or local income tax; no inheritance or inheritance tax; and eligible homestead tax breaks. However, the above benefits are based on the fact that a person is a Florida resident. There are certain steps that should be taken in order to establish Florida residency including, but not limited to:
- Filing a declaration of residence with the clerk in the county where your Florida home is located. (Note: the statement will be made public.)
- Register to vote in Florida for local and national elections (Recommendation: vote in the elections, not by postal vote, keep a copy of your voter registration card);
- Registration of all cars, boats, and planes in Florida;
- Obtaining a Florida driver’s license and receiving your driver’s license issued by the state in which you lived prior to moving to Florida;
- Applying for and obtaining homestead tax exemption from property taxes applied to your primary Florida residence (Note: To obtain Florida homestead tax exemption, any previous homestead benefits claimed in previous residence must be surrendered if you intend to continue to own the property while you reside in Florida);
- Notify the following of your change of address so all emails are sent to your Florida address: banks, credit card companies, social security agency, attorneys, partnerships you are affiliated with, all insurance companies, all professional associations you are a part of, etc .;
- If applicable, filing your final tax return for residence in your previous place of residence (note: your previous place of residence may still treat you as a resident based on the days you have been in the country along with other possible factors).
- Spend as much time in Florida as you can.
In addition to the above steps, it is recommended that you update or execute a new will that lists your Florida residence. For those moving to Florida with or without estate planning documents in place, a Florida attorney should review your estate plan to make sure the move doesn’t frustrate certain desires of the individual (e.g. certain situations). In addition, in many cases, the Florida attorney will advise whether your existing additional estate planning documents (i.e., power of attorney, will, and healthcare designation) are valid under Florida law and recommend the execution of new documents.
In addition to ditching heavy winter coats and packing your sunglasses in preparation for moving to Florida, be sure to discuss the establishment of Florida residence and your estate plan with your Florida attorney before you move. Such planning considerations will not only help you avoid disrupting your income tax, succession planning, and estate tax goals, but will also aid your new seating position to ensure a smooth transition to the Sunshine State.
1 California proposed a wealth tax for wealthy Californians that failed in 2020. See https://www.bizjournals.com/sanfrancisco/news/2020/12/10/california-s-latest-effort-to-raise-taxes -on-the-w.html #: ~: text = legislator% 20this% 20year% 20had% 20 considered, they% 20left% 20the% 20Golden% 20State. New York, which already has a state inheritance tax, recently proposed an inheritance tax designed to change the state inheritance tax system by introducing a separate inheritance tax while levying taxes on receiving gift income, changing inheritance tax rates, and creating a new gift tax be on donor. See https://www.gothamgazette.com/state/10171-state-legislators-revenue-inheritances-gifts-heirs-tax-.rich#:~:text=The%20heir’s%20tax%20proposal%20would,exempting%20retirement % 20and% 20pension% 20funds.
2 See https://www2.census.gov/programs-surveys/popest/tables/2010-2020/state/totals/nst-est2020.xlsx