Congratulations! You’ve decided to rent or buy a place in Florida and make the move for part or all of the year. I can personally attest to the fact that once you’ve settled in, you are going to really enjoy your new lifestyle.
Are You a Snowbird?
Now the question becomes…are you going to become a full-time resident or continue to live in two places – between Florida and another state? If you're one of the many people who spend their winters in Florida but come here from a high income tax state elsewhere in the country, e.g., NY, NJ, CT, MA, or IL, to name a few, and return there during the warmer months, you can save a lot of money by making Florida your permanent domicile. That way you can take advantage of not having to pay any state income tax as a Florida resident. Consider that you can potentially save thousands of dollars or more every year by fulfilling the residency requirements and making FL your permanent place of residence.
For those who only spend part of the year in Florida, it is important to understand what the term “domicile” means. The definition for most states is that you permanently reside in one state that you consider to be your legal residence – the state where you return after being away and where most, if not all, of your regular lifestyle unfolds. Especially if you are still working, full or part-time, and/or are a high net worth individual or couple, you should consider the advantage to becoming a permanent Florida resident.
Be Prepared for What Could Come
If you decide to make FL your permanent residence, and you are a high net worth individual or couple, you may be caught off guard to find out that you still owe taxes to your previous high-income tax state, even after you have moved to FL. Many people think that if they just spend 183 days or more in FL, they have successfully established a domicile there. Before you skip filing and paying income taxes in your “old” home state, be sure to check with your tax advisor because without properly establishing your domicile in FL, you could be in for an audit and be responsible for thousands, tens of thousands, or more dollars in your previous state. Some states like NY have an invasive audit process and if you or someone you know is unlucky enough to be audited by one of these high-tax states your life could be turned upside down!
The 183 Day Rule
How much time you spend in a state has implications for determining your residency status. In most cases, spending over half a year, or more than 183 days, in any one state can help to qualify you as a full-time resident in that state. But it’s not as simple as that. In order to not have to pay income tax in another state, you would have to prove that you have been in Florida for more than 183 days – or six months plus one day – AND properly establish your full-time residency in many other ways. Buying or renting a condo or a home and staying in that domicile for over 183 days is a start – keep in mind people travel for business and pleasure – so the 183 days rule has limitations at best. If you are audited by your previous state, the burden of proof is on you to produce the necessary evidence that you have in fact moved permanently to a new location (in this case FL) and have the intent to remain there full-time.
Here are some of the many “rules” and activities you must follow and maintain in order to show that you do reside permanently in Florida.
How to Prove Residency in Florida
If you retain two homes in two different states, and live in each part-time, but your intention is to make Florida your permanent domicile, the best way to prove that you are a resident is to do the following within a few months of arriving:
- Be sure that the FL home is livable all year round and not just a vacation entity
- Update your mailing address at the local FL post office
- Have all bills, banking and financial statements sent directly to your new FL address
- Obtain a FL driver’s license and register your vehicles in FL
- Register to vote in FL
- Close accounts at local banks in your old state and establish an account in FL
- Switch all of your Doctors, CPA, Broker, etc., to FL-based professionals
- If staying year-round in FL, sell your home in your previous state
- Apply for the FL Homestead Exemption by March 1 of the tax year for which the exemption is being requested
- Join memberships to social organizations or clubs in your new domicile state
- To be on the safe side, record how many days you spend in Florida versus your previous or secondary one
Once you have completed all or most of this list, and established your new domicile in FL, you may still have to file tax returns in both states for the first year in which you moved or the year after that. You will also need to find out how the state you moved from classifies a “full year” versus “part time” residency.
We strongly suggest that you speak with your tax professional about this prior to making a final decision to become a Florida resident. Be sure you have all of your ducks in a row so that you do not find out after the fact that you have to pay a large unanticipated tax bill.
If you are interested in discussing your investment strategy in Florida, reach out to me to have a no-obligation conversation at 888-simonsays (888-746-6672). I look forward to hearing from you. Or visit my website at https://www.saulsimon.com/ to learn more about Estate Planning and The Five Essential Steps to Retirement Planning.
Simon Financial Group
5355 Town Center Road, Suite 401
Boca Raton, FL 33486