Changing Your Residency From New York to Florida

Are you considering becoming a Florida resident?  There are many factors to consider. Most people want to give up their residency in New York and change to Florida in order to avoid income taxes and the New York State estate tax.   People also make the change in order to qualify for the homestead exemption and keep their Florida real estate taxes down.  However, there are a number of factors one needs to consider before making the switch.

First, if you continue to maintain real property in the State of New York, you will still need to file a New York estate tax return and you may owe estate taxes as a result of the ownership, notwithstanding Florida residency.  In addition, if you move to Florida, you will lose your STAR exemption, assuming you continue to own real property in New York, and you may also lose your $250,000 per person capital gains tax exclusion on the sale of your New York property, depending on when you sell it. The reason for this is that the STAR exemption only applies if you are a New York resident and the capital gains tax exclusion only applies to the sale of property which is your principal residence.  One certainly can not claim a homestead exemption as a Florida resident and then a STAR exemption as a New York resident. You can only have one residency. In order to avoid the tax exclusion, it is recommended you sell the New York property either before or promptly after moving to Florida. 

One should also take note that New York State has been aggressive in auditing people who switch their residency to Florida, so you should be prepared for an audit, keeping careful records of the time you spend in Florida and your trips back and forth to New York.  At a minimum, you should get a Florida driver’s license, register to vote in Florida, and show that most of your associations and contacts are in Florida, all in addition to showing that the majority of your time is spent in Florida.     

If you decide to change your residency to Florida, you will need to have new health care proxies, living wills and powers of attorney prepared, as the New York documents are generally not accepted in Florida.  While any will you have created will likely be valid, you may want to consider the creation of a revocable trust, since Florida probate is much more time-consuming and expensive than it is in New York.

As a last point, if you have any additional insurance, such as long-term insurance, you need to check to see if the same benefits will be available if you become a Florida resident.

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IRS Circular Disclosure:  Any tax advice contained in this communication is not intended or written to be used, and may not be used by you or anyone else, for the purpose of avoiding penalties imposed under the Internal Revenue Code.