If you're thinking of relocating, the tax ramifications might not be your first consideration. You might move because of a job change, to be closer to family or for a better climate after you retire. If you choose Florida, you'll get a break financially as well, because the state is tax friendly in several respects.
Florida does not impose an income tax on your earnings, and it won't levy a tax on your Social Security income either. Many pensions are exempt from taxation in the state as well.
Inheritance and Estate Taxes
Florida has no inheritance tax. In some other states, if you receive a bequest, you would have to sacrifice a percentage of it to the government. The state has not charged estate taxes since December 2004. Estate taxes are based on the value of your estate at the time of your death; these taxes would normally be paid from your estate before any of your debts and before your gifts are distributed to your beneficiaries. Estate taxes can result in your beneficiaries receiving less than you intended.
Florida is somewhat less friendly regarding sales taxes, but only five states do not charge sales tax at all, according to the Retirement Living Information Center. The state's rate is 6 percent, which is close to average. Comparatively, California charges 8.25 percent and the sales tax is 7 percent in Tennessee, Indiana, Rhode Island, Mississippi and New Jersey.
Property taxes are usually payable to your municipality or county based on the value of your home, and all states impose them. However, Florida will exempt up to $50,000 of your home's value if you own your property on January 1 of the calendar year, and increases are limited to 3 percent per year. If you're over 65 years of age, the increase may be lower. The state also exempts an additional $500 if you're a widower or widowed, and $500 if you're disabled.
Some Things to Consider
The $50,000 property tax exemption applies only if you are a Florida resident and live in that home. It might not apply if you move to Florida but maintain a home in another state and only spend certain months in Florida. If you don't keep another home, it's no issue, but if you want to make sure you take advantage of Florida's property tax benefits, Florida must be your state of primary residence, or domicile. Domicile is the place you always return to when you travel, even if you travel for months at a time. Make sure your vehicle is registered in Florida, that you vote in Florida and that you have a Florida driver's license. Make sure your Florida address is the mailing address for all your important mail. File your federal taxes from your Florida address as well.