Tax Savings by moving to Florida

Tax Savings by moving to Florida - 4/07/08

CAN WE REALLY SAVE TAXES BY MOVING TO FLORIDA?

That depends on your situation. But in many cases, the answer is yes. I'm certainly not encouraging people to move away. We need you to stay in Ohio to continue to support our businesses and civic organizations. But you may save money in retirement by moving.

LET'S START WITH INCOME TAXES. ANY DIFFERENCE?

Yes. In Ohio, we pay state income tax on income from earnings and investments. For an individual, the rate starts at less than 1% for people with income under $5000, and goes up to 7%. You hit the highest rate with income of $200,000.

So if your income from dividends, or interest or capital gains for 2007 was $40,000, your state income tax would be about $1100.

In Florida, there's no income tax. So in any example you could save $1100 just by changing your residence.

HOW DO YOU CHANGE YOUR RESIDENCE?

The law changed in Ohio to make it easier for people to change their legal residence. But it's still complicated. In general, must spend at least 183 days in Florida, more than 2 the year, to have Florida as your legal residence. You must also have a residence in Florida and you must file an affidavit with the State of Ohio by May 30th stating that you are not an Ohio resident. You also must take steps in Florida as well to change your domicile.

WHAT ABOUT ESTATE TAXES?

Ohio charges an estate or death tax at death. You pay tax for estates over $338,000, and the tax rate is from 5 to 7%. So on a $1 million estate, the Ohio estate tax is about $44,000. In Florida, there's no estate or death tax.

ANY OTHER TAX RULES WE SHOULD KNOW ABOUT?

Florida does have a property tax, as we do in Ohio. But Florida just passed a Super Homestead exemption which.

Also, Florida gives creditor protection to homes. So even if you are sued and lose, your creditor generally can't take your residence if it's in Florida. Ohio does not give the same protection for homes.

ANY TAX ADVANTAGES TO STAYING IN OHIO?

A. Florida does charge higher fees for many routine services, such as driver's licenses and deed recording, than does Ohio. And the cost of living in Florida is typically higher than Ohio. But you may save a lot of tax dollars by moving.

CLOSE: So should you retire to Florida? Jennifer has explained how you might save taxes. But there are two huge reasons not to move to Florida. First, you can't watch Golden Opportunities there. And second, and this is big, in Ohio, we have this snow, but in Florida, there's hurricanes.