It’s no secret that the majority of transplants to the state of Florida make the move in consideration of the beautiful weather and scenery. But Florida offers its residents many perks beyond a permanent vacation — including tax benefits and homestead protections.
Florida provides in its state constitution that there will be no state income or estate taxes imposed on its residents. To alter this rule, a statewide vote would be required, which means that in all likelihood this rule will not change. If you’re wondering how this could affect you, take this example: transplants from the State of California will see more than a twelve percent increase in annual take-home income because of this provision. That leaves more space in your budget for beachside cocktails with umbrellas. Great deal, right?
Florida has in place one of the most protective homestead laws in the United States. In a nutshell, Florida Homestead protects a resident’s primary residence from virtually all creditors, no matter what the value is of the residence. Florida Homestead also reduces real estate taxes owed on the residence by reducing the taxable value by $50,000. For example, if your residence is valued at $200,000, your real estate tax rate will be assessed on $150,000, rather than the full $200,000. Finally, Florida Homestead caps assessed home value increases to the lesser of 3% or the rate of inflation. This prevents substantial residence value increases in the event of drastic spikes in the real estate market, which stabilizes the amount of property tax you’ll have to pay.
While the Florida Homestead protections are a great incentive for your move to Florida, remember that these protections only apply to the primary homes of Florida residents. This means that you will only receive the Homestead protections on your Florida home if said home is where you permanently reside. Rental and investment properties, business and second homes are not afforded these protections.
You don’t automatically qualify for the Homestead protections in Florida. You must apply for your Homestead exemption at the county level.
In order to qualify as a Florida resident and show that your Florida home is your primary residence, you must establish your domicile in the state of Florida. Domicile is a fancy legal term that means your primary state of residence. To establish domicile in the state of Florida, you must live in the state for at least six months and one day of each year. You can also prove Florida residency in the following ways:
Generally speaking, you will want more evidence of Florida residency if you own property in another state, or you are labeled as a “snow bird” by the Florida locals.
There are a variety of incentives to becoming a Florida resident beyond the beautiful beaches and vacation atmosphere. It is a good idea to find a local attorney and CPA to ensure you are receiving all the benefits and incentives afforded to you by the state.