Relocate to Fla. for Tax Purposes? Here’s How It Works
People are relocating to Florida for more than just sunny, warm days. The Sunshine States' tax incentive has many young and older taxpayers looking toward its shores, Florida is just one of the 7 States that have passed the TCJA (Tax Cuts and Jobs Act - no income tax). Northerners, especially from States like New York and New Jersey are considering changing their official residence to Florida in order to save big on taxes. For those looking to split their time between their northern residence (Such as New York) and a home in Florida here's what needs to be done in order to prove that you have relocated to FL for tax purposes.
State tax rates in New York, range from 4 percent to 8.82 percent... Florida residents are not subject to a statewide income tax. - Fox Business
How to Establish Domicile in Florida
Even if you have multiple homes across different States, tax law says you have only one domicile.
The official IRS definition of “domicile” centers on two main criteria:
- The person intends to use that home (or at least reside in that state) indefinitely.
- Whenever the person leaves that home, he or she intends to return.
While this may seem clear and easy enough, you must provide intent during legal proceedings. The IRS and State Agencies will review a variety of actions as indicators of intent when evaluating someone’s claim of a change of domicile. If a person wants to claim domicile in the State of Florida, he or she should file a declaration of domicile at the appropriate Florida county offices.
Other important steps to establishing domicile include:
- Spending over half the year in Florida
- Registering to vote in Florida and requesting removal from voter rolls in New York
- Obtaining a Florida driver’s license and registering a vehicle in Florida
- Moving personal (especially “near and dear”) belongings to Florida
- Becoming an active member of local organizations like churches/synagogues, country clubs, wholesale clubs, etc.
- Opening and regularly using accounts at a Florida bank branch
- Reporting a Florida residence as one’s homestead for property tax purposes
- Listing a Florida address on federal tax forms
According to Floridarealtors.org "Even after successfully establishing domicile in Florida, some New York transplants to Florida still receive an unpleasant surprise at tax time. A change of domicile does NOT automatically exempt a person from being taxed as a New York resident. There are still more hurdles to clear."
How to avoid being classified as a statutory resident
According to Floridarealtors.org "Statutory residents” of New York are people whose domiciles are elsewhere, but who spend so much time in New York that the state can legally classify them as residents for tax purposes. In most cases, the cutoff is spending 183 days (that is, over half of the year) in New York.
Sounds easy, right?
BUT what some people may not know is that even spending part of the day within the State of New York's border will be considered as a "whole" day for tax purposes. The only exemption to this rule is if you have a layover at an airport or transit station. (and one stays within the airport/station during the layover)
Who is required to file a nonresident state tax return?
In most higher-tax states, a person earning a significant income within that state’s boundaries must pay state tax – even if the person is a nonresident with a Florida domicile!
The following endeavors can create New York tax liability:
- Owning Rental Properties
- Operating a business in New York
- Regularly performing in NY clubs and Theaters
Floridarealtors.org says "Avoiding nonresident tax liability is easier for a sole proprietor who has no New York employees and operates a service-based business out of a Florida home or office. For example, a freelance website designer who (a) establishes domicile in Florida, (b) works at home and/or as a “digital nomad” by using public wi-fi, and (c) stays within the 182-day limit for time spent in New York per year, may have a pretty clear path to completely escaping New York income tax.
The bottom line is that breaking free from New York taxation takes much more than just acquiring a Florida address. Before even beginning to plan a move south, it would be wise to consult with an experienced financial pro who has handled numerous tax cases in both New York and Florida."
"Come on down to Florida!”
Moving is a huge endeavor, especially when moving from one State to another! Relocating for tax purposes can add additional stress but in most cases, for taxpayers, both young and old jumping all of these hurdles is worth it in order to establish Florida domicile for tax purposes benefiting financially in the long-term.