You are a died-in-the-wool northerner. Lived in Brooklyn a good part of your life, then moved to New York City (NYC) to take up an investment banking career. Since turning fifty-five, you’ve been spending the winter months in a now dated, but comfortable, North Miami Beach condo. And every year you find yourself staying longer, playing more golf and tennis, and sitting on the white beaches thinking. Lately, your biggest thought has been, “Why not make this permanent?” Pack up everything – lock, stock, and barrel – and make the Sunshine State home.
The Pros and Cons of a permanent Florida move
It’s not a fantasy. You’ve experienced the champaign weather Florida offers on a silver platter from November through to April. Besides, who says that changing your state residency stops you from switching things around? You can still spend the sweltering periods in the Big Apple, but escape paying taxes there. Travel costs back and forth even out either way.
Lots of your buddies have made the Florida transition already. Healthcare’s not an issue, you have connected with excellent providers, and Medicare offers a broad choice. Hospital facilities like Jacksonville Memorial and Miami University’s Baskin Palmer are world-class. Even the Cleveland Clinic has a footprint in Florida.
Pro #1 – Taxation benefit
So let’s get to the crux of the matter. The huge attraction – the icing on the cake – is paying less tax.
- Florida is a zero tax state, and NYC isn’t. It can represent a substantial 12% of your annual income cut from your tax bill out-of-the-gate (i.e., taking city and state taxes into account). At your high-end income, the benefit is nothing to be sneezed at.
- Also, the recent Trump cap on state and local income tax deduction (SALT) from your federal tax calculation, at only $10,000, fuels your desire to come south even more.
Is there more to it than income tax? Oh, for sure there is!
Pro #2 – Investing out of one residence into another
Selling your primary residence in NYC may put three or four million dollars in your pocket at current values – even in a cooling market (according to Zillow).
- Perhaps you’re leaning toward a signature residence in a premier seafront condo building. You can keep your existing one for the kids when they visit and move up to a super-luxury development like Eighty Seven Park with an easy connection to South Beach. At worst, a dollar for dollar exchange investment-wise. If you opt for just the one, you’ll likely put a lot of free cash in your pocket.
- There’s no gain on the property taxes. Surprisingly, NYC is a little lower than the average in Miami – especially after the extra additions for non-ad Valorem services and “miles” multiplications for schools and community services. Note that the city is an exception when looking at state property taxes. New York state is substantially higher than Florida – more than double.
Here are the cons
High tax states don’t let you off the hook that easily. They’re onto the wealthy retiree exodus trend, and the indications are authorities will make things more complicated, not easier. Expect domicile scrutiny, so make sure the transition is for real. There’s no limit to how far the high-tax-state gatekeepers will drill down to prove your move is a farce, so don’t underestimate them.
There are some decisive steps and sacrifices one has to make. Some may be easy, but others could implode your plan if not taken seriously:
- Continuing property or work income in NYC will attract nonresident state taxes (i.e., no city taxes) – around 8% of income on the top end. It’s unlikely, but there may be other state credit forfeitures and surcharges that play into your situation, payable as you leave residency. Check it all out carefully with your accountant.
- It’s logical to believe that the wealthier you are, the higher the probability of a domicile audit. It’s especially the case if sizable percentage your nonresident income is still NYC based.
- Aside from the caveats above, the definition of the law is pretty murky. The burden of truth is on you to prove you no longer live in NYC. Of course, the first step is to notify the right entities of the change the second you make it.
- Get a Florida driving license, register to vote there, keep a record of transactions with local retail outlets. Also, have Miami registered motor vehicles, and advisably none in NYC.
- Make sure you have enough utility bills with the Miami address, your name, and that of your spouse’s on them.
In a nutshell, don’t spare anything when it comes to accumulating documentation to show that Miami is where you live now. Finally, make sure you spend at least 183 full days in Florida. Some pedantic forensic tax sleuths may take things as far as seeing if that’s true.
For some, the city-to-city emigration is a no-brainer. For others, it’s a head-scratcher. The more time you’ve spent living in the Sunshine State and liked it, the better. There are significant cash and tax benefits there for the taking with a minimal downside if most of the lifestyle and monetary boxes tick off. If they don’t, think again and step lightly before leaping.