Category: Financial and taxes in retirement
June 21, 2011 — The first article in this series, “Five Reasons Why You Should Retire in Another State“, explored the major reasons why it might be a really good idea for you to move from the Midwest or the Northeast to a different state. In this related article we have had the good fortune to interview Barton Smith, a successful Florida attorney who has helped many of his clients establish legal residency in the Sunshine State.
TR: Bart, thanks for taking the time to talk with us. We understand you are not giving legal advice here, but have agreed to provide some helpful overview information for Topretirements members. First off, could you tell us if there are any advantages to becoming a legal resident in Florida?
BSmith: There are obvious advantages to becoming a Florida resident. The first, and most well known, is… Florida has no state income tax. However, there are many states that offer this advantage; one nearby state is Texas. Where Florida differentiates itself from other states is Florida’s homestead protection.
TR: OK, we’ll bite. What is the Florida Homestead Protection?
BSmith: First, Florida’s homestead protection is found in our constitution which requires a supermajority to amend. Thus, the protection afforded to a Florida resident’s primary residence is firmly rooted and very difficult to amend or eliminate. When a person is looking for a residency the safety that this protection is grounded in our state constitution should give someone the peace of mind that even in troubled times the homestead protection will not be subject to change. The homestead protection comes with advantages beyond just the homestead exemption. It protects the Florida resident from losing their home, no matter what the value, to a creditor or any other lien except for mortgages. Although no one plans on retiring and having to file for bankruptcy, it is good to know that should this occur your home is safe.
TR:So does this Homestead Protection also save money on taxes?
BSmith: The Florida “Save our Home Act” provides for a homestead exemption on a Florida residents primary residence. Once qualified for the exemption, the assessed value of the property for taxes purposes has an exemption of the first $50,000.00 of taxable value for all taxing entities, except the School District, and a $25,000.00 exemption of taxable value for the school district. Also, and probably more importantly, once the property is homestead the assessed value for tax purposes cannot rise more than 3% in any given year. Thus, over a long time frame a property’s market value will increase more than its assessed value deriving equity from the difference which you do not pay taxes on.
TR: So how do I qualify for this exemption?
BSmith: In order for a Florida resident’s primary property to qualify for Florida’s homestead exemption you must intend for the residence to be your primary residence. Then the standard to obtain the exemption is a factual determination made by the County Property Appraiser’s office where the subject property is located. No one factor controls, but it is a totality of the circumstances test that is used. Factors included are:
(1) A formal declaration of domicile by the applicant recorded in the public records of the county in which the exemption is being sought.
(2) Evidence of the location where the applicant’s dependent children are registered for school.
(3) The place of employment of the applicant.
(4) The previous permanent residency by the applicant in a state other than Florida or in another country and the date non-Florida residency was terminated.
(5) Proof of voter registration in this state with the voter information card address of the applicant, or other official correspondence from the supervisor of elections providing proof of voter registration, matching the address of the physical location where the exemption is being sought.
(6) A valid Florida driver’s license issued under s. 322.18 or a valid Florida identification card issued under s. 322.051 and evidence of relinquishment of driver’s licenses from any other states.
(7) Issuance of a Florida license tag on any motor vehicle owned by the applicant.
(8) The address as listed on federal income tax returns filed by the applicant.
(9) The location where the applicant’s bank statements and checking accounts are registered.
(10) Proof of payment for utilities at the property for which permanent residency is being claimed
Fl. Stat. 196.015
Other considerations are taken into account, but in reality if you become a Florida resident and intend to make your Florida home your primary home you should qualify.
TR: Is this basically the same process as becoming a Florida resident?
BSmith: The only major requirement for changing your state residency is owning a home in Florida, obtaining a Florida Driver’s license and registering to vote in Florida. It does not take relatively long. Of course, I do not enjoy the wait at the DMV, but I believe most states are comparable in this regard.
TR: How about other tax considerations for people moving to Florida from other states?
BSmith: I am not an accountant and always advise people to speak to a Florida accountant before you transition to Florida residency. Things to consider are estate and inheritance taxes in your new state vs. your current home state.
TR: What kind of enforcement issues do people get in trouble with?
BSmith: There are several. One area where people get into trouble is if they decide to homestead their Florida property and a property in another state. Most property appraiser’s offices do research homestead exemptions in other states; if the double homestead is intentional and not accidental it is a crime.
Another is maintaining conditions whereby the state you are moving from continues to believe you are still a state resident. This is an area where you should speak with your local attorney and or accountant. For example, if you do not spend more than half the year (365 / 2 plus 1 day) in Florida, your home state might contest your residency. Similarly, by not following any of the steps I outlined above (e.g.; maintaining a NY drivers license or voting in Vermont), your home state could contend you are still a resident in that state, and assess you income taxes and fines.
Lastly, the same type of compliance issues are related to the Florida Save Our Home Act. Florida has prosecuted individuals who made a sham of becoming a full-time resident of the state when they actually were legally residents somewhere else.
TR: Thanks Barton, this has been extremely helpful to our members!
About Barton W. Smith, Esq.:
Barton Smith, P.L. provides a wide range of services to clients spanning the entire spectrum of legal services. All of our lawyers share the same vision: to provide the quality of services offered by the most well-regarded large firms with the flexibility and cultural advantages of a smaller one.
BARTON SMITH, P.L.
624 Whitehead Street
Key West, Florida 33040
For further reference:
Posted by John Brady on June 21st, 2011
Part 1: “5 Reasons Why Should Retire in a Different State”
“The Tax Friendliest States for Retirement”
“Worst States for Retirement – Updated“
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