No State Tax In Florida: How A Tax Free State Can Make A Lot Of Cents
Every year, the state bird of Florida flies down for the winter. As the wind blows through what’s left of its silver sheen, it’s suddenly startled by the sound of a beeping car horn. Locals know all about snowbirds – nice folks from up north who migrate to Florida to share in our warm weather and drive under the speed limit.
But let’s not kid ourselves, they’re also taking advantage of the fact that there’s no state tax in Florida. But as of late, it’s not just our grandparents who are taking advantage.
Thanks to a recent push from local leaders, several companies are proactively relocating – causing an influx of new industry and the people they employ.
As recently stated by Miami Mayor Francis Suarez. “We’re not going to tax them to death… we’re going to make sure that they have an opportunity to thrive and create an ecosystem that’s going to serve our community and make for a better city of Miami… my vision is that Miami will become one of the most globally important cities in the next five to 10 years.”
If you find yourself packing boxes and renting a U-Haul to make the move, below are a few reasons why moving to a tax free state can make a lot of dollars and sense from a planning perspective.
No State Tax In Florida
While Florida isn’t the sole benefactor of the “zero state tax” – I’d venture to say we’re one of the more attractive offers out there (considering Miami’s nightlife, tourism, beaches and weather).
But for a lot of people moving from up north (New York) or out west (California), the favorable tax situation alone can make it an attractive offer. Below is a quick glance at the potential savings of claiming residency in Florida can have on your pocket.
If you stick around long enough to retire in Florida, your Social Security benefits, pension, and IRA/401(k) distributions are untaxed at the state level – federal taxes may still apply.
On a slight tangent for the spenders out there, Florida also offers a comparatively lower sales tax than our western counterparts (though this may vary based on which county you reside in).
Diversify Your Bonds
This isn’t just a comedy skit (Chappelle fans will understand). If your income level calls for municipal bonds and not corporate bonds, – Florida brings about the added benefit of diversification.
A quick refresh: municipal bonds can offer tax free interest while corporate bonds generally do not.
However, depending on where you reside, you may only enjoy those tax free benefits if you buy muni bonds from your home state. What happens if you purchase out of state muni bonds? You could be subject to state tax on those interest payments.
Florida has no such caveat. As reason #1 stated above, due to the lack of state tax, residents of Florida can purchase tax free municipals from across the nation.
Real Estate Prices
Paying close to seven figures for a 3:2? Were you an expert at tiny living long before it was a fad? Another win for Miami is the average price of real estate. Per Zillow, the average home price in Miami is just shy of $400k.
As stated by Visualist Capitalist here, “California and Hawaii saw the biggest gains, with a number of cities ending up with a 200%+ increase over prices in 2000.”
Cost of Education
If you finally finished paying off your student debt only to realize you now have to pay for your kids’ future education – worry not. Public in-state Florida tuition ranks below the national average – $6,360 versus $9,970. With 42 public universities, Florida ranks top five for higher education options to choose from.
If you’ve built up a legacy for your family and won’t “bounce your check to the undertaker” – Florida helps here too. There is no estate or inheritance tax in Florida (federal estate tax may still apply) – helping you transfer your legacy to future generations a bit easier.
Adding It All Up
While prior generations had to work their entire lives to enjoy some fun under the sun – the bright side of post pandemic life and remote work make relocating easier than before.
While we’re far from perfect – hurricanes, spring breakers, and a bit of traffic (though there is some light at the end of that tunnel) – the financial perks of residing in Florida can add up. Have questions on how your move stacks up? Set some time to chat here.