Clients often move, especially as they age and desire to be in a warm climate. Moving can be an extremely pleasant experience, but there are certain legal and tax considerations that must be attended to.
Perhaps the most important item to consider, when moving out of New York, is the capital gains tax consequences of selling your home here or keeping it. The tax laws provide that everyone has a $250,000 capital gains tax exclusion for the sale of their primary residence. For a couple, the exclusion if $500,000. If one moves to Florida, keeps their home in New York, and then later decides to sell New York, the capital gains tax could be quite substantial. The law provides that in order for one to qualify for the capital gains tax exclusion, the residence must have been owned by you and been your principal residence for 2 of the last 5 years. If you sell outside that time frame, you will not be entitled to the exclusion.
Another overlooked factor when planning a move to New York, if one intends to keep their New York home, is that if your primary residence is changed, you will no longer be entitled to any STAR exemptions or other property tax relief programs which you are currently entitled to in New York. If moving to Florida, you should be entitled to a homestead exemption, which will save you money on real estate taxes, but the amount you save there is most likely very small compared to the increased taxes you will pay in New York without the exemptions here.
While many people move to Florida in order to avoid income tax and estate tax, the above-mentioned tax aspects should also be carefully examined before changing one’s residency.