Florida Residency – Is it in Your Future?

Changing your residency from one state to another is a significant life and family decision that can have great implications for your estate plan and tax situation. It’s more than the physical act of moving into a new home.

First and foremost, changing your state residence is a legal matter. That’s why it can be beneficial to proactively seek the advice of legal, tax, and financial professionals when considering a change and before taking any action.

From a wealth management perspective, moving to a new state is a process that requires looking at the relocation from all sides. Given the complexity of an individual’s financial situation, the risk of not fully understanding the ramifications, deadlines, and actions needed to establish permanent residence in a new state could result in unintended tax implications or forfeiting unknown benefits that could impact a wealth plan.

For thousands of Americans, Florida is already a place of secondary residence — the Sunshine State accounts for approximately 11% of all second homes in the U.S., the largest inventory of any state.¹ Given the state’s favorable weather, variety of things to do and lucrative tax advantages, it’s easy to understand why many may be considering ultimately establishing residency in the state of Florida.

A Tax-Friendly State

Florida offers several tax benefits to its residents. There is no state personal income tax, which would include income from salary, investment income, Social Security, retirement accounts like IRAs or 401(k)s, and pension plans. This alone could represent significant tax savings for retirees moving from states that levy state income taxes.

By comparison, the state of Massachusetts approved a “millionaire’s tax” in 2022. Under this law, Massachusetts residents who earn more than approximately $1 million annually through salary and capital gains will be charged a surtax of 4% on income exceeding the $1 million threshold, in addition to the standard flat 5% income tax rate. Lawmakers in several other states are considering similar tax legislation.²

Florida does not levy a state tax on estates, regardless of size. Florida also does not impose a state inheritance tax or gift tax, which are important considerations for Floridians to consider in their estate planning needs. However, residents may still be subject to federal taxes related to estates or gifts.

Florida homestead law also provides key property tax benefits for its residents. “Homestead” is defined as one's principal place of residence on a lot up to one-half acre within a municipality and up to 160 contiguous acres outside a municipality. The tax exemption, a deduction based on a homestead’s assessed value, could reduce the taxable value of a home by as much as $50,000 provided the resident lives at the property on the first day of the tax year. In addition, Florida law provides a high degree of creditor protection so that a homestead property cannot be forced into sale by a creditor to satisfy a judgment except in special circumstances.

The Journey to Florida Residency

As part of establishing permanent residency in Florida, transplants must satisfy statutory residence requirements for the specific programs they would like to qualify for (like the homestead exemption or in-state tuition) and pass the domicile test. While the two words seem similar, it’s important to understand the differences between “residence” and “domicile.” An easy way to distinguish the two is someone can have more than one residence, place of abode, or dwelling, but there’s only one domicile.

If coming from a state with legal provisions that define residency requirements, it will be important to ensure your previous home state would no longer consider you a resident. Commerce Trust can assist you with your transition away from your previous home state, in conjunction with your tax advisor, taking into consideration any applicable state residency laws and identifying steps to establish yourself as a non-resident.

The domicile test is more subjective and based on a person’s intention to make Florida their permanent home. However, once an individual decides to establish domicile in Florida, he or she must provide evidence to build the claim for domicile.³ The following actions are some ways to help make a case for the domicile test.

• File a Declaration of Domicile with the Clerk of Court in the Florida county where one resides.

• Establish a primary home by buying a home or signing a lease agreement.

• Complete a Florida voter registration application and vote in the state’s elections.

• Obtain a Florida driver’s license – and cancel the license from the former jurisdiction. Also, register all vehicles in Florida and get Florida license plates for them.  

• Update home and automobile insurance to show a Florida address.

• Establish a relationship with a Florida-based bank, whether it’s a brand-new bank or a Florida branch of a current bank. One easy way to do this is to secure a safe deposit box and transfer the contents of a safe deposit box located in a former state.

• Ensure that Florida is specified as your domicile and residence in documents that mention your residence, such as wills and trusts.

• Build relationships with Florida-based attorneys, accountants, or health care providers.

While these steps are critical, this list of criteria for proving domicile is not exhaustive. It’s important to remember no single action will automatically change a domicile.

Transitioning From Your State of Origin

Establishing residency in Florida is just one side of the equation. Residency with your state of origin must be undone which means severing all legal connections with that state. This adds a distinct layer of complexity to a move. Different states have different minimum requirements, audit triggers, and enforcement levels.

Some states have aggressively challenged former residents who have moved to Florida, claiming these individuals have not severed all ties to the former state and therefore can continue to be taxed. More states may take a greater interest in this issue as these migratory patterns become more impactful to state revenue. Factors used to determine a connection to a state of origin include days spent there, business activities carried out in a former state, and where sentimental objects - family heirlooms, prized collectibles, photo albums, and even pets — are located.

Seeking Advice

If you are considering or planning to establish permanent residency in a new state, as a client of Commerce Trust you can expect us to engage our team of experienced estate and tax planners, investment managers, private bankers, and trust administrators to guide you along the journey and ensure the coordinated execution of your plan.

If you are considering making Florida your new home state, contact Commerce Trust, to learn how we can help you with wealth planning needs.

For more information about Florida, please visit

Official Florida state government: www.myflorida.com

Florida Department of Revenue www.floridarevenue.com

Florida Department of Tourism www.visitflorida.com

¹ “Eye on Housing,” National Association of Home Builders, https://eyeonhousing.org/2022/12/top-posts-of-2022-the-nations-stock-of-second-homes/, December 27, 2022.

² “Planning for the Millionaire’s Tax – Not just for Massachusetts,” Forbes, https://www.forbes.com/sites/matthewerskine/2023/02/14/planning-for-the-millionaires-taxnot-just-for-massachusetts/, February 14, 2023.

³ “The 2023 Florida Statutes, 222.17: Manifesting and evidencing domicile in Florida,” State of Florida Legislature, http://www.leg.state.fl.us/Statutes/index.cfm.

The opinions and other information in the commentary are provided as of April 10, 2024. This summary is intended to provide general information only, and may be of value to the reader and audience.

This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such.

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Commerce Trust is a division of Commerce Bank.

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