Are you moving or considering a move to Florida? You’re not alone. Each year, more than 330,000 individuals change their domicile to Florida. There are several reasons why Florida is a preferred destination: the sunshine, amusement parks, some of the best beaches in the world, — and no state income tax! Nor does Florida have a state inheritance/estate tax. (If you are a Florida resident and inherit from someone who is a resident of another state, we suggest consulting a tax professional in that state to see if your inheritance is subject to its inheritance tax.)
Domicile is a legal residence. It is the place in which you have the intention to make a permanent home.
As a Florida resident, you may realize savings on property taxes since Florida provides many tax exemptions on primary residences, including:
- homestead (principal place of residence) exemption;
- widow/widower exemption;
- disability exemption;
- limited income senior exemption;
- military/veterans exemptions;
- fallen hero exemption; and
- total and permanent disability exemption (nonservice connected and first responder).
The homestead exemption could reduce the value of your homestead property by up to $50,000, resulting in a savings of $750 annually on property taxes, and the exemption is portable. Homeowners who move from one Florida homestead to another can transfer the saving they have accumulated from their prior Florida homestead to their new one when they apply for the homestead exemption on their new home.
Additionally, the Save Our Homes Cap on homestead property limits the increase in the assessed value of your home to 3% annually.
A Florida resident’s primary residence is protected from levy and execution by their judgment creditors by Article X Section 4 of the Florida Constitution. Florida also provides its residents with statutory creditor protection for life insurance proceeds and cash value, annuities, retirement accounts, and wages. This helps foster peace of mind that certain of your assets are not as easily reached by creditors. For married couples, Florida recognizes the Tenancy by the Entireties (TBE) form of joint survivorship ownership over real and personal property. TBE property may be protected from the creditors of one spouse if the other spouse is not also a party to the underlying claim.
Steps to Help Establish Florida as Your Domicile
Taking the steps described below will help get you on your way to taking advantage of the benefits afforded Florida residents and show your soon-to-be-formerdomicile state your intent to terminate your residency. While Florida may welcome you as a permanent resident, the state in which you currently reside may need some convincing before it lets you — and your taxes — leave.
Obtain an official identification card that shows your Florida address. You can apply for a Florida driver’s license from your local Florida Department of Motor Vehicles (DMV), or a Florida identification card if you do not drive. If you are obtaining a driver’s license, you will have to take a vision test and may need to take a written driving test if you have any issues on your driving record. Your automobiles, boats, and other vehicles that are located in Florida should to be registered with the Florida Department of Highway Safety and Motor Vehicles. You may locate an office near you through its website, www.Flhsmv.gov. While at the DMV, you can register to vote. Registering to vote in Florida is more evidence of your intent to make Florida your domicile. If you did not register to vote while obtaining your driver’s license or ID, you can do so via the website www.registertovoteflorida.gov. If you own the Florida home in which you live, or if you plan to purchase a home in Florida, apply for the Florida homestead exemption and any other exemptions for which you may qualify. You can visit your local county property appraiser’s office in person or online to obtain the application. Please note that applications for the homestead exemption must be submitted by March 1 of the year for which you wish to obtain the exemption. You should also consider applying for a Florida Declaration of Domicile. While not required to establish Florida residency, a Florida Declaration of Domicile is an effective way to put the public on notice that you intend to make Florida your permanent residence. You can obtain a Florida Declaration of Domicile application from the property appraiser’s office in your Florida county of residence. Once properly executed (that is, signed by you and notarized), it is then recorded in the public records of your county of residence. With this document, you declare that you are an official resident of Florida because you reside there, maintain a place of residence in the state, and intend to make Florida your permanent home.
Notify the Internal Revenue Service and state taxing authorities of your change of address. If you normally file a resident state income tax return in your current state, file a final state income tax return and notify that state’s taxing authority of your relocation to Florida. For federal income tax purposes, update your address to your new Florida address and file your return with the Internal Revenue Service Center, Charlotte, North Carolina. If you receive Social Security, notify the Social Security Administration of your new Florida address. Update your estate plan. If you already established your estate plan (will, trust, power of attorney, health care proxy, living will), it is likely governed by the laws of your soonto-be-former-domicile state. An update to your estate plan with Florida law governing the revised documents further shows your intent to terminate ties to the other state and strengthen ties to Florida. While laws on estate planning may be similar from state to state, each state likely has some particular formalities. For instance, Florida has certain requirements for who can be the executor (“personal representative” in Florida) of your estate. Also, Florida has certain requirements that relate to how a primary residence passes to beneficiaries on the death of the owner. Finally, Florida’s laws as they relate to ancillary estate planning documents, such as durable powers of attorney, health care surrogates, and living wills, also may be very different from the corresponding laws in other states.
Additional steps to show your commitment to making Florida your permanent residence would be to change your mailing address on all financial accounts, services, and subscriptions. You should also update the address on your passport.
A Note of Caution
If you intend to spend a significant amount of time outside of Florida, plan to be present in Florida for a minimum of six months and one day, which is the minimum time required to be considered a Florida resident.
While there is no conclusive test for determining state domicile, the more steps you take to show you are terminating connections with your current state of domicile and the more steps you take to show connections with Florida, the greater the likelihood that your current state of domicile will “let you go,” and the more you can take advantage of the benefits afforded to Florida residents.
If you have any questions about domicile or the steps set forth in this article, please reach out to your trusted advisor at PNC Bank, N.A.