Florida Taxes

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The date that you move to Florida and claim domicile in this State can affect your net-worth! We moved from Maryland, which has an income tax, to Florida, which does not. The Maryland tax is based on money earned (or in our case, capital gains) while a resident.

Through the Grace of God, we did a three-way swap to sell our home in Maryland and to buy the one here in Florida. We sold our home to a young couple with three children, who lived in a small town-house in Baltimore. The young couple sold their town-house to a man who owned a home here in Sun City Center, but lived in Maryland and no longer wanted to maintain it. And we bought his home here in Sun City Center. (And the gentleman from Maryland was able to turn around and sell the town-house within a week and make a $5,000 profit!) Everybody was happy with the arrangement. All of the papers were signed on February 25. We decided to hold the young couple's mortgage on the home that we had sold to them. This meant that we had to come up with enough money to pay for the Florida home on the 25th. Had I sold stock to pay for the house prior to the settlement, then I would have had to pay Maryland tax on it. Instead, I got a 30-day loan from a Maryland bank to provide the money at settlement time. Then we traveled to Florida and arrived here on the evening of the 27th. The next morning we went to the Courthouse in Tampa and registered to be residents in Florida. And the next day I sold the stock to repay the bank loan. But now, since I was a resident of Florida, I did not have to pay Maryland for the capital gains that we realized. This saved us thousands of dollars. Therefore, if you are going to cash-in stock to purchase a home here in Sun City Center, consider that Florida has no income tax, whereas the state you're moving from probably does. As they say on Broadway, timing is everything!

Florida gets most of its revenue from rather high sales, entertainment and room taxes. Even though Florida does not have an income tax, they do have a thing called an Intangibles Tax. This, in general terms, is a rather low tax (0.1 to 0.2%) on the stock which you own as of January 1 of each year. IRA's and the like are excluded from the tax. This tax is being phased-out and will be gone by 2002.

Florida also has a Homestead Exemption for property taxes. If you are a resident on January 1, the assessed value of your home will be lowered by $25,000. Since we became residents on February 28, we were unable to file for the exemption that year, but were able to do so the following year. Since Canadians tend to maintain their Canadian citizenship (because of the medical benefits), they cannot file for a homestead exemption as a resident of Florida.

Once we got settled in, we got our "affairs in order." There are companies around who will assist you in doing this. They are aware of all the Florida laws and what can be done. So to us, it was well worth the money to hire one. The company that we used was The Life Trust Group, Inc. in Sarasota, 1(800)600-0999. Jerry Davis runs it. First he sent us a form asking many questions about how we wanted things handled. Then he visited us and on the basis of the form, discussed the various aspects of what we wanted. Then he and a lawyer prepared the appropriate documents. A few days later, he picked us up and drove us to the lawyer where everything was signed and notarized. The only thing that couldn't be done by the lawyer was to get our local bank accounts changed, so Jerry went with us to do that. He then gave us a notebook with the following twelve sections of legal documents!

  • Living Trust
  • Pour-over Will
  • Power of Attorney
  • Memorandum of Trust
  • Insurance Inventory
  • Asset Inventory
  • Keepsake Designation
  • Locator File
  • Living Will
  • Surrogate Designation
  • Pre-need Guardian
  • Memorial Instructions

The most important thing that he did for us was to setup two Living Trusts. Jean and I divided up our assets into roughly two equal parts. These were then put into two Living Trusts. By being Living Trusts, we can continue to manage them (like buy and sell stock). If I die first, Jean can manage my trust as well as hers. And if she dies first, then I can manage hers as well as mine. The big advantage comes to our daughter, Laurie, when we have both boarded the final train. The IRS will tax each Trust separately for estate tax purposes. This means that instead of paying tax on the amount over $650,000, Laurie will start paying on the amount of her inheritance over $1,300,000! This will give her additional thousands of dollars to spend on trips abroad. Even so, I would rather have her squander it, than the Government!

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If you have any corrections or comments,
please e-mail them to me: Dave Brown.