Florida domicile — why and how?
If you are thinking of becoming a Florida resident or have already made the wise choice to make Florida your domicile – congratulations! If you are still in the decision-making process, let’s consider the host of advantages of becoming a Florida resident and making Florida your “domicile state.”
In addition to our wonderful weather and lifestyle, there are financial rewards as well. Residents of all states are subject to Federal Income Tax, but Florida residents enjoy no state income tax, estate tax, inheritance tax or intangible tax. This usually means tax savings on IRA withdrawals, pension, annuity, and employment income. However, if you own assets or derive income in or from another state, you may still be subject to income and estate tax in that state.
For example, a Wisconsin resident making over $258,950 pays a state income tax of 7.65 percent over and above the federal income tax. The Florida resident savings in this case is nearly $20,000. IRA withdrawals are considered income too.
Florida residents also enjoy property tax savings and Florida homestead creditor protection. Making your Florida home your homestead with the property tax assessor can lead to a $50,000 reduction in the taxable assessed value of your home. In addition, the Save Our Homes Property Assessment Cap limits the increase in your home’s assessed value to no more than 3 percent annually – regardless of that year’s actual appreciation. There are even portability provisions if you sell your home and acquire a new one.
There are steps to take to achieve Florida domicile and ensure your successful disengagement from your former state:
– Obtain a Florida driver’s license
– Register to vote
– Cancel prior voter registration
– File for Homestead
– License and insure a vehicle in Florida
– File a Declaration of Domicile
– Execute new Florida Estate Planning documents
– Change your church and country club affiliations
– Bring heirlooms to Florida
– Do not take advantage of discounts in your former state
– Write “Final Return” on your last former state income tax return to put them on notice
– Bring your bank and investment accounts to Florida
Must you complete all these steps to be successful? Not necessarily, but the more of these actions you can add to your “completed column,” the better you will fare if your former state decides to audit you. It is also important to keep records of these actions as proof to your former state that you have met the necessary requirements as an official Florida resident.
Some records that will help are:
– Proof of presence outside your former state (183 days), i.e.,: Minnesota has required printed airline boarding passes
– Receipts – credit card and bank statements showing activity outside of your former state
– Physical calendars with notes
Robin L. Cook is with wealth services for The Sanibel Captiva Trust Company.