Moving to the Sunshine State: Change of Domicile Planning Considerations

Bilzin Sumberg
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Bilzin Sumberg

Florida has long been known as a hot-spot for retirees and snowbirds to move for its sunny weather and beautiful beaches. In recent years, however, since the "SALT Deduction Cap" established by the 2017 Tax Cuts and Jobs Act ("TCJA"), there has been an influx of individuals and families moving to the Sunshine State for tax purposes. Additionally, as remote work has become the new "norm" since the COVID-19 pandemic, increased flexibility to work remotely has allowed individuals from high-tax states like New York and California the opportunity to seamlessly make their move to Florida. Moreover, high-tax states continue to propose increasing taxes to deal with budget deficits that have been exacerbated from COVID-19 pandemic shutdowns.1 In fact, according to the US Census Bureau, the states with the largest population decreases in 2019-2020 were New York, Illinois, and California, whereas North Carolina, Florida, and Texas saw the largest population increases.2

Prior to the TCJA, taxpayers were allowed an unlimited deduction on their federal income tax returns for state and local taxes paid. The TCJA limited SALT deductions for tax years 2018 through 2025 to $10,000 for single taxpayers and married couples filing jointly. Last month, there were suggestions that the repeal of the SALT Deduction Cap would be included in the next COVID-19 relief package. The latest relief package, which the President signed into law last week, however, does not address the repeal of the SALT Deduction Cap. Accordingly, for now, the SALT Deduction Cap remains, and, combined with increased tax proposals, Florida will continue to be an attractive domicile alternative for individuals that find it too expensive to live and own property in high-tax states like New York, California, and Connecticut.

Some of the tax benefits Florida residents enjoy include: no state or local personal income tax; no estate or inheritance tax; and eligible homestead property tax benefits. The aforementioned benefits, however, are predicated on the fact that a person is domiciled in Florida. There are certain steps one should take to establish Florida domicile including, but not limited to:

  • Filing a Declaration of Domicile with the Clerk of Court in the county where your Florida home is located. (Note: the Declaration will become public record);
  • Registering to vote in Florida for local and national elections (Recommendation: vote at the polls, not by absentee ballot, keep a copy of your voter registration card);
  • Registering all automobiles, boats, and airplanes in Florida;
  • Obtaining a Florida driver's license and surrendering your license issued by the state you lived in prior to moving to Florida;
  • Applying for and obtaining the homestead exemption from real property taxes assessed against your primary Florida residence (Note: to obtain the Florida homestead exemption, any prior homestead benefits claimed in the former domicile must be surrendered if you plan to continue owning the property while domiciled in Florida);
  • Notifying the following of your change of address, so all mail is sent to your Florida address: banks, credit card issuers, Social Security Administration, attorneys, partnerships in which you are a partner, all insurance companies, any professional organizations to which you belong, etc.;
  • If applicable, filing your final resident tax returns in your former domicile jurisdiction (Note: your former domicile may still continue to treat you as a resident based on days spent within the jurisdiction, along with other possible factors);
  • Spend as much time as possible in Florida.

In addition to the aforementioned steps, it is recommended to update or execute a new will reciting your Florida residence. For those moving to Florida with or without existing estate planning documents, a Florida attorney should review your estate plan to ensure the move does not frustrate certain wishes of the individual (e.g., Florida homestead passes by operation of law and not through an individual's will under certain situations). Additionally, in many cases, the Florida attorney will advise whether your existing ancillary estate planning documents (i.e., power of attorney, living will, and health care designation) are valid under Florida law and recommend new documents to be executed.

Besides ditching heavy winter coats and packing your sunglasses in preparation for your move to Florida, make sure to discuss establishing Florida domicile and your estate plan with Florida counsel prior to your move. Such planning considerations will not only help you avoid disruption to your income tax, succession planning, and estate tax goals but will also support your new domicile position to ensure a smooth transition to the Sunshine State. 

 

1 California proposed a wealth tax on wealthy Californians that did not pass in 2020. See https://www.bizjournals.com/sanfrancisco/news/2020/12/10/california-s-latest-effort-to-raise-taxes-on-the-w.html#:~:text=Lawmakers%20this%20year%20had%20considered,they%20left%20the%20Golden%20State. New York, already with a state estate tax, has recently proposed an heir’s tax that would amend its state estate tax system by creating a separate inheritance tax while also establishing taxes on receiving gift income, changing estate tax rates, and creating a new gift tax on donors. See https://www.gothamgazette.com/state/10171-state-legislators-revenue-inheritances-gifts-heirs-tax-.rich#:~:text=The%20heir's%20tax%20proposal%20would,exempting%20retirement%20and%20pension%20funds.
2 See https://www2.census.gov/programs-surveys/popest/tables/2010-2020/state/totals/nst-est2020.xlsx

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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