How Snowbirds Can Be Taxed as Florida Residents
If you live in a high-tax state during the summer but winter in Florida, you can save big bucks by establishing residency in the Sunshine State.
The leaves and temperatures are falling up north. The days are getting shorter, too. These are all signs that it's time for birds to head south for the winter. And that includes "snowbirds" — that is, people who live up north during the warm-weather months but live down south during the winter. If you're one of the thousands of snowbirds heading to Florida this year, I bet you'll hear a lot of talk about the tax benefits of being a full-fledged resident of the Sunshine State. After all, Florida is one of only nine states without an income tax. So if your summer home is in a high-tax state up north — New York, New Jersey, Massachusetts, Illinois, Connecticut, Wisconsin and the like — you can potentially save thousands of dollars each year if you can establish residency in Florida.
But you can't just say "I'm a Florida resident" and have the income tax bill from your warm-weather state magically disappear. You need to show that Florida is your primary and permanent home — and it's your actions, not your words, that count the most. That means cutting as many northern ties as possible and putting down real roots in Florida. But no matter how rooted in Florida you become, don't be surprised if your summer state still wants you to pay taxes as a resident on all your income (instead of paying tax only on in-state income as a nonresident). The tax agencies in many high-tax northern states have well-earned reputations for fighting wealthier snowbirds who suddenly claim to be Florida residents. So, if you're going to make that claim, be sure you can back it up. Here are a few things you can do to show that you are, in fact, a resident of Florida if your warm-weather state challenges your residency status.
Spend Most of Your Time in Florida
Many states have what's called a 183-day rule, which basically means the state will tax you as a resident if you own a home there and spend at least 183 days during the year (basically, six months) in the state. (Some states require more in-state days to be considered a resident.) The days don't have to be consecutive, and even part of a day can count as a full day.
Snowbirds can use this rule to their advantage. If you spend more than half your time in Florida, you obviously won't reach the 183-day threshold in the state where you spend your summers. So, if your warm-weather state follows the 183-day rule, try your best to be in Florida for at least that many days each year. If you can't spend that much time in Florida, then take a vacation, visit family or friends, or otherwise spend time in some other location — anything to avoid spending 183 days or more in your high-tax summer state.
It's also a good idea to keep a record of where you are each day of the year, just in case the tax agency from your northern state picks you for a residency audit. Keeping receipts from the time you spent in Florida will also help if you're audited. For instance, if you had dinner at a Florida restaurant, a receipt for the meal with a Florida address on it will help prove that you were in the Sunshine State on that particular day.
Obtain a Florida Driver's License
If you really want to be a Florida resident, getting a Florida driver's license is a must. In fact, you should do this right away, since you'll need the license to vote, apply for property tax breaks, and do other things in Florida that will help you establish residency in the state.
New residents must apply for a Florida driver's license in person at any local office offering driver licenses services (click here to find the nearest office). The fee for an initial Florida Class E license is $48 (unless you're a veteran, the local tax collector may also tack on an additional $6.25 service fee). You'll also need to submit specific documents to obtain a REAL-ID compliant driver's license (the list of required documents for U.S. citizens can be found on the Florida Department of Highway Safety and Motor Vehicles' website).
Register and Insure Your Vehicles in Florida
When you're getting your driver's license, make sure you register your car or truck in Florida, too. If you own an RV or boat, register it in Florida as well. This is another "must do" item on your checklist to show that you consider Florida your permanent home.
You'll have to pay a registration fee. The amount is based on the type and/or weight of the vehicle. A list of the various motor vehicle registration fees can be found on the Florida Department of Highway Safety and Motor Vehicles' website.
And don't forget to call your auto insurance carrier and have your vehicles covered in the Sunshine State.
Get Out and About in Florida
Engaging in the normal activities of life in Florida will also help show that you're a real Florida resident. For example, shop in Florida as much as you can – especially if you're making a large purchase, like a car or boat. And make sure you keep those receipts in case a tax auditor from your northern state starts asking questions.
If you're into fishing, get a fishing license in Florida. If you're an avid reader, get a library card in Florida. Sign up for rewards cards for grocery stores and other retailers in Florida, too. These may seem like little things, but they can add up in your favor if you need to prove your residency status.
Vote in Florida
Where you're registered to vote says a lot about the place you see as your permanent home. So, to be seen as a real Florida resident, make sure you register to vote (and actually vote) in Florida.
You can register to vote in Florida by completing a paper application and delivering it in person or by mail to the Division of Elections, any supervisor of an elections' office, an office that issues driver's licenses, or a voter registration agency (e.g., public assistance office, center for independent living, office serving persons with disabilities, public library, or armed forces recruitment office). You can also register online at registertovoteflorida.gov. You'll need a Florida driver's license (or ID card) and the last four digits of your Social Security number to complete the online registration.
Tell People You're a Florida Resident
Yeah, we told you in the introduction that you can't just say "I'm a Florida resident" to change your residency for state tax purposes. And that's true — you can't just declare that you're a Florida resident. But even if you do all the other things we're recommending, you'll never convince a tax auditor from up north that you're a Florida resident if you don't present yourself as a Florida resident to the rest of the world. So, if you meet someone new, tell them you're from Florida. If you're filling out a form that asks for your address, use your Florida address. And update your Facebook page so that your Florida city or town is listed as your current home. Auditors will look for any indication that you don't really think of Florida as your primary and permanent home — don't give them any ammunition.
Tell the State of Florida that you're a resident, too. File a "Declaration of Domicile" with the clerk of circuit court in the Florida county where you live. ("Domicile" is a legal term that generally means the place that you intend to be your primary and permanent home.) There isn't a standard, state-wide form that you can use. Instead, each county will have its own version — as an example, click here for the Broward County form.
Buy or Rent a Bigger Home in Florida
Let's face it…it doesn't really look like you intend to make Florida your permanent home if you own a giant house up north but only rent a tiny apartment in Florida. That's why New York, for example, considers the size of each home a snowbird owns or rents to be an important factor in determining residency. So, if possible, get a Florida home that's at least roughly the same size as your northern home — although it's better if your home in Florida is larger.
If your summer home is in New York, at least the state will consider home size in the context of the geographic area in which each residence is located. For example, while a 3,000 square foot apartment in Manhattan may seem cramped when compared to a sprawling homestead in Florida, New York tax auditors may nevertheless see the two homes as relatively equal because the apartment is spacious by New York City standards.
Enroll Your Children in Florida Schools
If you have school-aged children, enroll them in a Florida school. Why? Because the quality of the local schools is usually an important factor for parents deciding where to live. And it doesn't matter if the schools are public or private. So, for example, if your children attend a boarding school up north and rarely visit your Florida residence, a tax auditor from your warm-weather state could point to this as evidence that you don't truly consider Florida to be your primary and permanent home.
Keep Important Personal Items and Documents in Florida
Tax auditors know that most people keep prized personal possessions in their primary home. So, bring your most treasured items down to Florida for safekeeping to show that you consider the state to be your primary and permanent home. This includes all things that are near and dear to your heart, including photo albums, wedding dresses, family heirlooms, stamp or coin collections, works of art, rare books, and any other item that has sentimental value. Pets fall into this category, too. So, make sure you bring Fido down to Florida with you!
Important documents and records should also be kept in Florida. This includes mortgage documents, insurance policies, wills, passports, Social Security cards and the like. Renting a safe deposit box in Florida to hold these items is a good idea, too.
Visit Doctors, Lawyers and CPAs in Florida
It can be hard leaving a family doctor up north that you've been seeing for decades and finding a new physician down in Florida. But you need to do just that if you want to convince a tax auditor that you've really settled down in Florida. The same goes for the dentists, lawyers, accountants, and other professionals you use in your summer state — you should replace them with new people in Florida. It's probably OK to see a specialist once in a while outside Florida, but your regular doctor (or other professional) should be in the Sunshine State. If you want to go to the extra mile, start seeing a barber or hair stylist in Florida, too.
Do Your Banking in Florida
Even in today's world where online banking is popular, tax auditors know that most people park their money in a bank near their home. So, if you're claiming to be a Florida resident, you should move your money to a Florida bank. It can be a national bank — like Bank of America — but there should be a branch close to your Florida home where you can do your banking in person (including renting a safe deposit box). You'll also want to make sure all bank statements are sent to your Florida address.
This advice extends to all your financial activities. Start working with Florida-based brokers, financial planners, insurance agents and the like. And, again, make sure all statements, payments and notices are sent to your home in Florida, including credit card statements. If you're retired, have your Social Security checks or retirement plan distributions mailed to Florida or deposited into a Florida bank.
Pay Bills in Florida
While you're making arrangements to have your credit card statements sent to your Florida address, do the same for all your other bills. Do it for your electric, phone, cable, gas, water and other utility bills — even if they're for your warm-weather home.
Of course, make sure you pay them all on time no matter where you happen to be living when they're due. Most bills can be paid online these days, so you should still be able to take care of them even if you're up north when the bills arrive in Florida.
Socialize in Florida
To show that your life is now centered in Florida (i.e., that you're a real Florida resident), join clubs, take up hobbies, volunteer and meet new people in the state. Tax auditors are going to question your Florida-resident credentials if you're constantly heading back up north to socialize. You can keep your northern friends, but make new ones in Florida, too. (Invite your Yankee friends down to Florida for a week of winter sun and sand…they'll love you for it!)
If you're already a member of a national organization like the Lions Club or VFW, change the address on file to your Florida address and attend meetings in Florida. If you're a religious person, get involved with a church, synagogue or other house of worship in Florida as well. Join a gym in the Sunshine State, too. The more you socialize in Florida – and maintain ties to social organizations in the state – the easier it will be to demonstrate a commitment to your new southern home.
Pay Taxes as a Florida Resident
Sure, there's no state income tax in Florida, but that doesn't mean Florida residents don't pay other taxes. For example, you still have to pay federal income taxes as a Florida resident. So, when filing your next federal 1040, make sure you list your Florida address as your home address. You should also change your address on file with the IRS by submitting Form 8822.
As for Florida taxes, make sure you pay your local real estate taxes on time and in full. If you own a business, are self-employed, or rent out property in Florida, you might also owe personal property taxes. If you're not paying these taxes as required, or any other Florida taxes levied on residents, your standing as a true Florida resident will be diminished in the eyes of the law.
Apply for a Florida Homestead Property Tax Exemption
In addition to paying taxes in Florida, take advantage of the state's tax breaks for residents. For example, if you own a home in Florida, apply for the state's homestead property tax exemption. Not only could your home's taxable value be reduced by as much as $50,000, but it's further evidence of your status as a Florida resident. That's a win-win!
To apply, submit Form DR-501 and all required documentation to the property appraiser in the Florida county where the property is located. You can also use the form to apply for property tax breaks available to disabled or blind persons, senior citizens, widow(er)s, veterans, and first responders.
If a similar tax break is available in your northern state, don't claim it if it's only available to residents. If you do, you're telling your summer state that you're a resident there, not in Florida.
Update Your Estate Plan
There are at least two good reasons why you should consider updating your will and other estate planning documents with Florida information. First, listing your Florida address as your primary residence, including Florida property, and indicating that your estate will be administered under Florida law will help you establish Florida residency. Again, it shows that you're treating Florida as your permanent home.
Second, Florida doesn't impose a state-level estate or inheritance tax. A number of northern states — Connecticut, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York and Pennsylvania, to name a few — will tax your estate or heirs if you die as one of their residents. If you're declared a resident of Florida, however, those taxes from other states can be avoided. Your family will thank you for it once you pass away.
Work in Florida
If you work at home or in multiple locations, make sure your employer lists your Florida address as your home of record. Paychecks and W-2 forms should be sent to Florida, and all your benefits should be based in the state.
If you're an independent contractor, all invoices and other correspondence should include your Florida address. Payments and 1099 forms should be sent to Florida, too.
If you're a doctor, lawyer or other professional, get licensed to practice to Florida.
Move Your Business to Florida
If you own a business in your summer state, moving it to Florida will certainly help your case if your status as a Florida resident is challenged.
If moving your northern business to Florida isn't possible, running it from Florida might be an option. However, business owners in Florida who are deeply immersed in their company's operations up north can have a hard time establishing residency in Florida. Even if you're running your business from a Miami Beach cabana, tax auditors in your summer state will see substantial involvement in the management of a business in their state as evidence of residency in that state. It will be weighed along with all other factors, but this type of evidence can persuade a court that you're not really a Florida resident.
The degree of your involvement in the business' day-to-day operations will be looked at closely. You don't necessarily have to sell the business or completely relinquish your management role, but taking more of a "hands-off" approach will support your claim for Florida residency.