Thinking About Becoming a Florida Resident?

Here are four big benefits to being a Florida Resident:

1. No State Income Tax

Florida is one of only seven states with no income tax and is the only “no tax” state well suited for retirees. Since Florida’s prohibition against state income tax is included in the State Constitution, it would take a (highly unlikely) constitutional amendment to change it. Florida’s Constitution also prohibits municipalities and counties from levying any personal income tax.

2. No State Death Tax or Estate Tax

Florida’s Constitution bans separately imposing estate or inheritance tax of the kind present in many other states. Known as the Economic Growth and Tax Relief Reconciliation Act of 2001, the legislation made significant changes to the federal estate tax, greatly increasing the federal tax exemption. This change has been beneficial to individual taxpayers, but it has been very bad for the states themselves. Until 2005, states shared in the revenue generated by the federal estate tax, receiving an amount equal to what is known as the “State Death Tax Credit.”

Some states are making up for the lost revenue by enacting their own separate estate tax – a phenomenon known as “decoupling.” Among those that have decoupled from the federal estate tax exemption are Maryland, Virginia, and the District of Columbia. In Florida, residents are protected from that threat.

3. Florida’s Homestead Law

The State of Florida’s Homestead Law protects the Florida resident from losing his or her home to a creditor or any other lien holder, except for mortgages. Furthermore, this protection is found in the state Constitution, which requires a supermajority to amend. While no one plans to retire and subsequently have to file for bankruptcy, it provides great peace of mind knowing that should this occur, your home is safe.

4. Florida’s “Save Our Home Act”

This act provides for a homestead exemption on a Floridian’s primary residence. Once qualified, the assessed value of the property for tax purposes carries an exemption for the first $50,000 of taxable value for all taxing entities except the school district (which allows a $25,000 exemption). Also, once the property is qualified for the homestead exemption, the assessed value for tax purposes cannot rise more than 3% in any given year. Thus, over long periods of time, a property’s market value will increase more than its assessed value, resulting in equity which you do not pay tax on.