Blog

Florida is often described as a “tax-free state.” While Florida does not impose an individual state income tax, residents still face federal income taxes, property taxes, sales taxes, unique insurance expenses and other financial considerations.

A sound financial plan should reflect the realities of living, working and retiring in Florida—not merely the absence of a state individual income tax.

Florida Has No Individual State Income Tax

Florida residents are not required to file an individual Florida income-tax return. However, federal income taxes continue to apply.

The absence of a Florida individual income tax can affect decisions involving:

• Retirement-account distributions
• Roth conversions
• Capital gains
• Business income
• Retirement-income planning
• Relocation from another state

People moving to Florida should also determine whether they have properly ended residency in their former state. Changing a mailing address may be only one part of establishing Florida domicile.

A former state could consider where the individual owns or occupies a home, spends time, works, votes and conducts financial affairs. Depending on the circumstances, a new Florida resident may still need to file a part-year or nonresident return with the former state.

Tax Planning Still Matters in Florida

Living in a state without an individual income tax does not eliminate the value of tax planning.

Federal tax considerations can affect Roth conversions, required minimum distributions, Social Security taxation, Medicare income-related surcharges, charitable giving and retirement withdrawals.

Tax planning is most effective when coordinated with investment and financial-planning decisions throughout the year—not addressed only when the tax return is prepared.

This highlights the value of working with an advisor who coordinates financial planning, year-round tax planning and tax-return preparation when those services are offered.

Florida Homestead Benefits

Eligible Florida homeowners may qualify for a homestead exemption on their permanent residence.

According to the Florida Department of Revenue, the exemption can reduce a property’s taxable value by as much as $50,000 under current law. Applications are submitted to the property appraiser in the county where the property is located.

Homeowners should not assume that purchasing and occupying a Florida home automatically completes the property-tax exemption process. Eligibility requirements and filing deadlines should be confirmed with the appropriate county property appraiser.

Save Our Homes and Portability

A property receiving the Florida homestead exemption may also qualify for the Save Our Homes assessment limitation.

Over time, this limitation can create a difference between the home’s market value and its assessed value for property-tax purposes. That difference may become financially significant for homeowners who remain in the same residence for many years.

When an eligible homeowner moves from one Florida homestead to another, part of the accumulated assessment difference may potentially be transferred—or “ported”—to the new homestead.

The homestead exemption itself is not transferred. Portability relates to the accumulated assessment benefit and is subject to eligibility requirements and filing deadlines.

Hurricane Deductibles and Emergency Reserves

Florida homeowners should carefully review their property insurance coverage and deductibles.

A hurricane deductible may be different from the standard deductible that applies to other losses. Florida insurers generally offer options that may include a fixed amount or a percentage of the dwelling or structure limit.

A percentage-based deductible can represent a substantial expense. For example, a 2% hurricane deductible on a home insured for $500,000 would equal $10,000.

A Florida financial plan should therefore consider reserves for:

• Hurricane and flood deductibles
• Emergency travel or evacuation
• Temporary housing
• Repairs not covered by insurance
• Extended power outages
• Insurance-premium increases

The appropriate emergency reserve may be larger than a traditional guideline suggests, depending on the home, insurance coverage and household circumstances.

Homeowners should also determine whether they need separate flood coverage. Wind and flood damage may be treated differently, and standard homeowners insurance may not cover every form of hurricane-related damage.

Florida Homestead and Estate Planning

Florida homestead considerations extend beyond property taxes. Florida law contains special rules that can affect creditor protection and the transfer of a primary residence at death.

The application of those rules can depend on family circumstances, property ownership and whether the homeowner has a spouse or minor children.

Financial planning can help identify questions involving:

• How the home is titled
• Intended beneficiaries
• Mortgage obligations
• Liquidity for surviving family members
• Wills and trusts
• Powers of attorney
• Beneficiary designations

An advisor can help coordinate the overall financial strategy, while an attorney provides legal advice and prepares the appropriate documents.

Choosing a Financial Advisor in Florida

When interviewing a Florida financial advisor, consider asking:

• Does the advisor provide year-round tax planning?
• Is tax-return preparation offered?
• Will insurance costs and deductibles be included in financial projections?
• Does the advisor review emergency reserves?
• Is the advisor familiar with homestead and portability considerations?
• Will the advisor coordinate with estate-planning attorneys?
• How is the advisor compensated?
• What services are included in the fee?

Vetoshko Wealth Management is a fee-only financial advisory firm based in North Port, Florida. We help individuals and families coordinate financial planning, investment management, tax planning and tax-return preparation.

Review our financial-planning and wealth-management services, or schedule a complimentary 30- to 45-minute consultation to learn whether Vetoshko Wealth Management may be the right financial-planning partner for you.

This material is provided for general educational purposes and should not be construed as individualized investment, insurance, tax or legal advice. Laws, tax rules and insurance provisions may change.

Sources

Florida Department of Revenue: Florida Personal Income-Tax Filing Requirements

Florida Department of Revenue: Homestead Exemption, Save Our Homes and Portability

Florida Department of Financial Services: Florida’s Hurricane Deductible

Schedule A Consultation