In addition to great weather and thousands of miles of waterfront, one of Florida’s most attractive features is the lack of a state income tax. As one of only seven states with no income tax, Florida is a top choice for those who are interested in establishing residency and saving on taxes.
Unfortunately, states with an income tax are becoming more vigilant about verification of residency and have launched thousands of audits in an attempt to find those who are not truly residents of the Sunshine State. They are starved for revenue and these audits are seen as an easy source of cash. It can be extremely expensive and time consuming for a taxpayer to prove their residency case and the state is the final arbiter. With such uncertainty, many are choosing to simply pay the back taxes, interest and penalties rather than risk the vagaries of a contest.
Following a few simple protocols can more fully assure that this will not happen to you. This checklist can help reduce the chances of an unfavorable outcome.
Once you have a Florida address and have moved:
☐ Begin maintaining a detailed log of where you are; travel itineraries/receipts, etc. This information would be used as evidence to support where you have spent your time. You must spend less than 183 days per year in your former state to be considered a “non-resident”.
☐ Consider when and where your primary credit cards are being used. Credit card charges are a prima facie evidence of where you have been, when and for how long.
☐ Obtain a Florida drivers license and surrender your previous license.
☐ Update your address on your passport to your new address.
☐ Register your vehicles in Florida and surrender your old registrations.
☐ Register to vote in Florida. Remove your name from the voting registry in your former state.
☐ If you purchase a home in Florida, apply for the Florida homestead exemption which will also provide real estate tax benefits and additional asset protection.
Prior to Filing Your Next Tax Return:
☐ File a Declaration of Domicile provided by the County Clerk of the county to which you are moving. Each county generally makes the form available on its website. Additionally, it is recommended that you mail a copy of the declaration to the tax department in your former state.
☐ Declare Florida as your domicile and the situs for all trusts in all estate planning documents (wills, trusts, powers of attorney, advanced medical directives, etc.) A visit to an attorney licensed in Florida to make sure your documents conform to current laws is also advisable.
☐ Previous State Taxes: If your previous state had an income tax, file a final tax return as a part-year resident through the day you moved. If you earn income in your previous state, file as a non-resident tax return using your new address.
☐ Federal Income Taxes: File federal income tax returns using your new address.
☐ If you maintain properties in multiple states, there are additional tax considerations that should be discussed with your tax professional.
Additional Items to Consider:
☐ Establish yourself with a local bank, or transfer your relationship with a major bank to a local branch.
☐ Update your mailing addresses on all applicable services and subscriptions (for example, newspapers and magazines).
☐ Travel: Establish your new residence as your “home-base” when traveling; leave and return from your Florida residence. If you depart from or arrive in your taxable state, then the days spent traveling could be counted as time spent there.
At Cassaday & Company, our goal is to help you be thorough and proactive to avoid any unnecessary financial complications. Make sure you confirm any decisions about Florida residency with your tax professional.
If you have any questions, please contact your financial advisor or a member of our Financial Planning team at (703)506-8200 for more information. ■