Establishing a Florida Domicile
Florida is one of five states that does not impose income or estate tax. Of these five, only Florida and Texas are in the Sunbelt. Florida has generous tax benefits, especially compared to many states in the Mid-Atlantic region. To take advantage of Florida’s benefits requires meticulous attention to changing domicile and the details, documentation and intent required to do so. Florida residents pay no state income tax and no state inheritance or estate tax.
- A choice of domicile may be tax-motivated, but personal concerns, comfort and family matters may take practical precedence.
- Maintaining a Florida domicile and a second home in another state requires careful documented adherence to the requirement of daily presence in Florida for more than 183 days and maintenance of primary affiliations in Florida. A person can only have one domicile, and it is paramount you have a “closer connection” to your Florida home and your intent be always to return to Florida after a period of absence.
Forty-three states may impose income taxes anywhere from 1.4-9.0%, and even higher for incomes over $1 million. State and county income taxes can also vary widely. Some states tax income from individual retirement accounts and pensions, and others do not. All of these considerations impact the actual tax you pay at various life stages.
Florida has no state estate or inheritance tax. Even if your assets are below the federal estate tax threshold, death taxes in some states can be significant. Also, some states may not have an inheritance tax on property passing to a spouse, but do have one if property is passing to descendants, siblings or other beneficiaries.
Florida homestead property is subject to lower property taxes and special protection from creditors. Some states, particularly in the Northeast and Mid-Atlantic, have very high local property and school taxes. Florida’s homestead exemption covers most home types, including, for example, single family homes and condominiums.
Florida does have less generous laws than most other states related to who can serve as a personal representative, also known as an executor, of your estate. Generally, only Florida residents, persons related by blood, marriage or adoption and Florida corporate fiduciaries may serve without bond. For this reason, if you move to Florida you should have a Florida attorney review your will and be certain the persons you name as your fiduciaries can serve without any additional burden.
Your domicile is the place to which you always intend to return; it is your home. As states like New York and New Jersey have litigated the domicile of an ever-greater number of persons trying to leave these high tax states, we know they will look at many factors, including where your extended family resides, how often you visit, where you keep your art collection, where your primary doctor resides, where your beloved pets reside, where your charities are located and so on. You must basically shift the center of your universe to Florida if you are going to successfully change your domicile.
Steps to Establish Florida Domicile: Actions Speak Louder than Words
1. File a Florida Declaration of Domicile in the Office of the Clerk of the Circuit Court in the county in which you reside.
2. Declare you are a legal resident of the State of Florida in your will, codicil or trust. Prepare a Florida health care directive.
3. Register to vote in Florida.
4. Transfer all bank accounts, safe deposit boxes and securities to a Florida bank location (safe deposit boxes in Florida are not sealed by the state upon death of a lessee or co-lessee).
5. Register your automobile in Florida and obtain a Florida driver’s license.
6. File your federal income tax return with your Florida address.
7. File non-resident income tax return (if applicable) in the former state.
8. State you are a resident of Florida in all business transactions and charitable activities, and when traveling out of state register as being from Florida and give a Florida address.
9. Change all credit card addresses to Florida.
10. Change social, religious and other national organization memberships to Florida affiliations or branches. Register as non-resident member with former organizations if possible, and keep a low profile in the non-Florida organization(s).
11. Do not claim a homestead or similar property tax exemption outside Florida.
12. Do not ask for any discount available only to residents of the former state (e.g., school tuition or state senior citizen discounts).
13. If you retain ownership in real estate in the former state, contemplate placing the property in a Florida revocable living trust and/or a partnership or other vehicle (this may also avoid probate). Declare this as a secondary residence on insurance policies.
14. Maintain a log keeping meticulous travel records to support your presence in Florida for more than 183 days per year. If audited, you may be asked to produce records for cell phone bills, credit card statements and E-Z Pass records. An auditor will count days spent partially in the former state and partially in Florida as days in the former state.
15. Invite your family and friends to Florida for the holidays instead of returning to the former state; you are trying to establish a “closer connection” with Florida.
16. Do not claim the federal income tax exclusion for gain on sale of a home in the former state more than three years after moving to Florida. A married couple can exclude from taxable income $500,000 of gain on the sale of a home they used as their principal residence for two of the last five years. If you moved to Florida on March 1, 2019, you must sell your former home by February 28, 2022, to claim the tax exclusion for the property.
This material provides information of possible interest to Glenmede’s clients and friends, and does not provide investment, tax, legal or other advice. It contains Glenmede’s opinions, which may change after the date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss anything they see here of interest with their attorney, tax advisor or Glenmede Relationship Manager.