Two Tax Breaks Trump Will Get by Moving from New York to Florida
President Trump isn't the only rich guy out there trying to slash his state and local tax bill by declaring a change of residency from New York to Florida.
President Trump isn't the only rich guy out there trying to slash his state and local tax bill by declaring a change of residency from New York to Florida. Thousands of other wealthy New Yorkers have tried this move, too. After all, Florida has some of the lowest taxes in the country, while New York has some of the highest.
We'll see how this plan works out for the president once he leaves office. The New York Department of Taxation and Finance has a well-earned reputation for fighting wealthy part-time residents who don't want to pay New York taxes anymore, so it isn't clear yet whether the change of residency will stick for state tax purposes. But if Trump can show a true change of domicile from New York to Florida, the president can save a ton on taxes in the following two ways.
State Income Taxes Will Go Down Significantly
When it comes to state income taxes, state residents typically pay tax on all their income, regardless of where they earned it. On the other hand, nonresidents only pay tax on income generated within the state. That's the key to the state income tax savings President Trump stands to reap.
Florida has no state income tax. New York has one of the highest income taxes in the country, with a top rate of 8.82%. As a New York resident, the president would pay New York taxes on all his income. As a Florida resident, he would only pay New York taxes on income coming from New York. In either case, there would be no Florida income taxes to pay. While the president's New York-sourced income may be significant, as a Florida resident he would completely avoid state tax on all income from all other sources, which is presumably a huge tax savings.
State Death Taxes Will Be Avoided
President Trump's family is probably thrilled to have the president take up residency in Florida. If the president qualifies as a resident of the Sunshine State, there would be no state-level estate or inheritance taxes to pay when he passes away.
On the other hand, New York not only imposes an estate tax, it has an unusual "cliff" provision that would probably subject the entire Trump estate to the tax. Generally, the New York estate tax is only imposed on that portion of an estate over the exemption amount for the year of death ($5.74 million for 2019). However, if the value of the estate is more than 105% of the exemption amount, the exemption isn't available and the entire estate is taxed. Presumably, the president's estate will be greater than the exemption amount for the year he dies, so the cliff provision would take effect.