Florida Estate Taxes

Florida Estate Taxes - 4/04/08

Jeff: The cold weather is finally behind us…….we hope! But if you're concerned that Ohio's taxes may chill your lifestyle, you may have considered whether it makes financial sense to move to Florida. Here with an answer to this chilling question is attorney Michael Solomon.

Jeff: I have often heard that many people move to Florida to save taxes. What taxes can they save?

Mike: Most people think about the death tax. Florida does not impose a death tax but Ohio does. Ohio exempts only the first $338,000 from the death tax. For example, if a married couple have a 1 million dollar estate, they will owe an Ohio estate tax of $44,700. If they were a resident of Florida they would owe zero death taxes. However remember the death tax is due on the second death. So even if let's say the husband passes away, the wife can move to Florida at that time and avoid the death tax.

A more significant consideration is the Ohio income tax. The Ohio income tax rate ranges from less than 1% for people with taxable income of less than 5000 to almost 7% for people with over $200,000. Florida does not have a personal income tax. So if you earn a portion of your income as dividends, or interest or capital gains you can avoid a considerable amount of Ohio income taxes if you are not an Ohio resident. For example, let's say that you have 40,000 a year in taxable income; you could owe as much as $1100 of Ohio income tax. If you lived in Florida there would be no income tax.

Jeff: So how do you establish a Florida residence or for that matter any other state?

Mike: The Ohio Department of Taxation issued a release at the end of last year that explains the rules. You are not an Ohio resident if you meet these four criteria:

  1. You were in Ohio less than 183 days of the year, (less than ½ the year).
  2. You have at least one place to stay like a condo, apartment or house outside of Ohio.
  3. You did not change your domicile in that year
  4. You file an affidavit with the state of Ohio by May 30th (saying that you were not an Ohio resident for the preceding year).

You will have to present proof showing the number of days you lived out of state. Many people keep a log. Airline tickets or mail forwarding also can be used to show that you were not in Ohio. This regulation can be found on the Department of taxation website, www.tax.ohio.gov.

Jeff: Are there any other tax reasons to have your residence outside of Ohio?

Mike: You should look at each state you are considering for any quirks in the local law. For example in Florida, if you make Florida your domicile, you can claim a homestead exemption in Florida. The advantage of this is that the increase of the value of the home for property tax purposes is capped at 3% per year. When real estate was growing that was a big benefit. And in Florida, but not in Ohio, your house is protected from lawsuit and creditors.

Jeff: Are there any reasons to keep your Ohio domicile.

Mike: Yes, go Browns, go CAVS, and go Tribe!