by Lisa Goddy, Esq.
Do you own a home in Florida? Have you ever considered becoming a Florida resident? Florida gives you attractive tax planning tools that may help make that decision a little easier. Unlike other states, Florida has no income tax, no state estate tax, no inheritance tax and no gift tax. Florida also provides its residents very generous homestead protections, exemptions and Save our Homes (SOH), but in order to take advantage of these benefits, you must be a Florida resident, which means a change of domicile to Florida.
How do I change my domicile?
It is important to understand that a person’s “domicile” may be very different from his “residence.” While you may have a number of different residences, you can have only one domicile. Domicile is defined as actual residence within a particular state combined with the “intention” of making that state one’s permanent home. So, in order to establish a new domicile, you must first abandon your old domicile.
Since domicile is a question of intent, courts often look to a person’s overall manner of living to determine whether there has been a change of domicile. Specific actions which would show your intent to become domiciled in Florida may include, but are not limited to, the following:
- Owning a home in Florida;
- Filing a Declaration of Domicile in your Florida county of residence when you own another residence in a northern state;
- Registering an automobile in Florida;
- Obtaining a Florida driver’s license;
- Registering to vote in Florida;
- Applying for the Florida homestead exemption (discussed below);
- Working in Florida;
- Transacting business in Florida;
- Having social memberships in Florida;
- Having estate planning documents showing Florida residency;
- Sending children to Florida schools; and
- Paying Florida taxes (such as real estate taxes).
What is the homestead exemption and SOH?
If you intend to make Florida your domicile, it is important to take advantage of Florida’s favorable homestead laws. In order for your Florida home to be considered your “homestead” you must “own” the home and you must reside in the home as your permanent residence. If your home qualifies as your “homestead” then three different types of benefits and limitations will apply, relating to: (1) real estate taxes; (2) creditor protection; and (3) limits on the ability to transfer your homestead.
Let’s take a closer look at the real estate tax benefits. It is important to apply for the homestead exemption and Save our Homes (SOH) on your Florida homestead. The homestead exemption allows for reduction of up to $50,000 from the assessed value of your residence.
Once you have obtained the homestead exemption, SOH places a limitation of three percent (3%) on annual assessment increases on your homestead property. In other words, the SOH caps the increase in the assessed value of the homestead property for purposes of calculating the real estate tax that is owed in any given year. The assessed value will not increase more than three percent (3%) or the percentage change in Consumer Price Index (CPI), whichever is less. The average increase over the years has been around two percent (2%) per year. So, while market values on property may sky rocket, the SOH assessed value on your homestead for real estate tax purposes is limited by the cap.
Who is eligible for the homestead exemption and SOH?
To qualify for the homestead exemption and SOH on your Florida residence, you must be a permanent Florida resident as of January 1st the year you wish to apply. You will be required to show proof of residency. The property appraiser’s office generally requires the following items:
- Evidence of Ownership (deed, tax receipt, etc.)
- Social Security Numbers for all owners
- Voter Registration (dated prior to January 1st)
- Florida Driver’s License (dated prior to January 1st)
- Florida Vehicle Registration (dated prior to January 1st)
If you own a residence in another state, you may also wish to file with the Clerk of Courts a Declaration of Domicile proving that you are a Florida resident and your Florida residence is your primary home. You are allowed to apply for homestead in one state. Therefore, your spouse cannot be homesteaded in another state while you are homesteaded in Florida. Your spouse must decide to give up the competing homestead exemption, if any.
When and where can I apply for homestead exemption and SOH?
New applications for the homestead exemption for the current year must be made prior to March 1st at the Property Appraiser’s office in the county where your residence is located. Some counties require you to file your application in person. Other counties allow you to mail in your application or apply online. You must check your county’s property appraiser’s office as to its requirements.
Don’t pack your bags and move to Florida just yet. There are many complexities involved in changing your domicile and understanding the benefits and limitations of Florida’s unique homestead laws. Prior to your change of domicile, it is essential for you to discuss the proper timing of the change with your tax advisor and your attorney, who is licensed and has practiced in Florida.