Establishing a Florida Domicile

Florida is one of eight states that does not impose income or estate tax. Of these eight, only Florida, Tennessee and Texas are in the Sunbelt. Florida has generous tax benefits, especially compared to many states. While it is relatively simple to become a Florida resident, it is more difficult to become a non-resident from your former state. Thus, changing your state of taxation to Florida requires meticulous attention to the details, documentation and intent required to do so.

State taxation is based on two tests:

1. Domicile: This is what you subjectively consider your permanent home, and such intent is evidenced by where you spend your time plus “checklist”-type items such as where you vote, visit doctors, register your car and so on. You pay state taxes to your state of domicile.
2. Residency: This is a statutory time test, that is, where you spend your time. Many states use a 183-day test. If you are in your former state for more than 183 days, then even though you may be domiciled in your new state, you also may be a statutory resident of your former state if it has a statutory residency text (such as New York and New Jersey), exposing you to taxation in both states.

A choice of domicile may be tax-motivated, but personal concerns, comfort and family matters may take practical precedence (for example, a desire to be near grandchildren or other family). While it is relatively easy to become a Florida resident for tax purposes, it can be quite difficult to disconnect from a prior state, particularly if you do not sell your prior home or if you maintain an active business there.

Maintaining a Florida domicile and a second home in another state requires carefully documented adherence to the requirements of not more than 183 days in the other state, and more daily presence in Florida than anywhere else (for example, if you move your domicile to Florida from New Jersey, but spend five months in New Jersey, three in Florida, and four in Maine, New Jersey may claim you never abandoned your New Jersey domicile). Some higher tax states, particularly New York and New Jersey, have been increasingly litigating the domicile of residents moving to other states. To successfully change your domicile, you must officially change your principal residence.

Florida Facts

• Forty-one states plus the District of Columbia impose income taxes anywhere from 1.0% to over 12.0%, and even higher for incomes over $1 million. Although these states do not impose an income tax, New Hampshire taxes interest and dividends, and Washington state taxes capital gains.
• State and county income taxes can also vary widely. Some states tax income from individual retirement accounts and pensions, and others do not. All of these considerations impact the actual tax you pay at various life stages.
• Unlike some other states, Florida has no state estate or inheritance tax. Even if your assets are below the federal estate tax threshold, death taxes in some states can be significant.
• Florida homestead property is subject to lower property taxes and special protection from creditors. Florida’s homestead exemption covers most home types, including, for example, single family homes and condominiums.
• Only Florida residents, persons related by blood, marriage or adoption, and Florida corporate fiduciaries may serve as a personal representative, or executor, of your estate without bond. If you move to Florida, you should have a Florida attorney review your will and related estate planning documents to be certain the persons you name as your fiduciaries can serve without any additional burden and comply with Florida law.

Steps to Establish Florida Domicile

• File a Florida Declaration of Domicile in the Office of the Clerk of the Circuit Court in the county in which you reside.
• Declare you are a legal resident of the State of Florida in your will, codicil or trust. Prepare a Florida power of attorney and healthcare directive.
• Register to vote in Florida, and actually vote there.
• Transfer all bank accounts, safe deposit boxes and securities to a Florida bank location (safe deposit boxes in Florida are not sealed by the state upon death of a lessee or co-lessee).
• Register your automobile in Florida and obtain a Florida driver’s license.
• File your federal income tax return with your Florida address.
• File nonresident income tax return (if applicable) in the former state.
• State you are a resident of Florida in all business transactions and charitable activities, and when traveling out of state register as being from Florida and give a Florida address.
• Change all credit card addresses to Florida.
• Change social, religious and other national organization memberships to Florida affiliations or branches.
• Do not claim a homestead or similar property tax exemption outside Florida.
• Do not ask for any discount available only to residents of the former state (for example, school tuition or state senior citizen discounts).
• If you retain ownership in real estate in the former state, talk to your advisors about placing the property in a Florida revocable living trust, limited liability company, or partnership (this may avoid ancillary probate, but special arrangements may be needed to avoid such state’s death taxation). Declare this as a secondary residence or vacation home on insurance policies.
• If audited, you may be asked to produce records such as cell phone bills, credit card statements and statements for E-Z Pass, SunPass or other electronic toll paying devices. An auditor will count partial days spent in either the former state or Florida as days in the former state.
• Invite your family and friends to Florida for the holidays instead of returning to the former state to establish a “closer connection” with Florida.
• Do not claim the federal income tax exclusion for gain on sale of a home in the former state more than three years after moving to Florida.