How U.S. Real Estate Investors Can Save Taxes by Moving to Florida
Tax reform overhaul has triggered wealthy Americans from across the country to move in droves to establish Florida residency, this represents a great opportunity for Real Estate Investors to be able to pay a lower amount of taxes. The tax implications of the Trump administration's changes to the tax code could have a significant impact on you as a high-income earner.
In December 2017, the Tax Cuts and Jobs Act was enacted. It limited the deductions of state and local taxes (SALT) from federal taxable income starting in 2018. The new tax law has caps on state and local tax deductions of $10,000.
This cap on the state and local tax deductions effectively changes the relative costs of living among higher cost and lower cost locales. This may influence many the decisions you make, including where you decide to live.
Bloomberg is reporting that Americans from states like Connecticut, New York, Illinois, New Jersey, and California with income taxes as high as 13.3 percent are being called "tax refugees" by Bloomberg. The caps on state and local tax deductions from federal taxes has created a surge of movement out of the states where high earners like you recognize the serious savings available on Florida taxes. Florida has no state income tax.
Some rich Americans have already moved from these states earning $50 to $150 million a year. Like them, you could purchase a property in Florida, then use your tax savings, in just 2 to 5 years, and basically get another free house, and you never have to deal with snow or wildfires, again.
You could decide to just move personally, but many wealthy Americans are then following their personal move by bringing their company’s headquarters to Florida, as well. If you are retired, or retiring soon, so coming to a low tax state was on the agenda anyway, the tax reform may simply hasten your decision.
Most states levy some sort of income taxes. The Real Deal explains that for top level earners, state taxes can be:
- 8.82% in New York
- 8.97% in New Jersey
- 6.99% in Connecticut
- 4.95 percent in Illinois
- 13.3% in California
You can’t just pick up and move to Florida and avoid all these taxes. There are rules for establishing Florida residency. Here is a list of some things you can do to establish Florida residency so you can save on your state taxes:
- Stay in Florida at least half the year
- Get a Florida driver’s license
- File a Declaration of Domicile
- Apply for a Homestead Property tax exemption
- Register to Vote
- File your income tax returns using your Florida tax address
- Change your wills and any estate planning to show your Florida residence
- Notify your old state Department of Revenue
- Notify the Social Security Administration
- Make sure your Florida address is on your passport and credit cards
- Make sure your insurance company and Medicare and any pensions have your Florida address
A number of other states — Alaska, South Dakota, Nevada, Texas, Wyoming and Washington — do not have a state income tax either, but Florida wins with most potential residents.
The decision to change residence always includes several factors. For now, tax advantages are likely huge factor for you if you are currently living in a high tax state. Florida is looking better and better all the time with reasonable real estate prices, no state income tax, and palm trees. An untaxed paradise.
FAS Consultants live and work in Florida. We know the details for how your residency affects your taxes and can advise you on how much a move to Florida could save you in taxes. It could be that you are one of those lucky Americans who are literally paid to live in paradise.
Contact us with any questions, and for a consultation to assess your situation.
FAS CPA & Consultants
9000 SW 137 AV Suite 224 Miami, FL 33186 T: 786-462-7899 E: [email protected]
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