Tax Benefits of Living in Florida
No state income tax is just one of many tax advantages of living in Florida
Every day about 100 people relocate to Florida from various other U.S. states. Many of those individuals come to take advantage of the state's welcoming tax laws. Florida is one of only seven states in the country that has no state income tax. While Alaska, Nevada, South Dakota, Texas, Washington, and Wyoming offer the same state income tax relief, none of these states can match Florida's tropical oasis of beautiful sunsets, crystal blue water and white sand beaches. On the other hand, while a state like California compares similarly to Florida in terms of its beauty and temperate climate, residents of California pay a 13.3% state income tax yet receive state benefits analogous to Florida residents who pay 0.0%.
Apart from offering no state income tax, Florida residents receive other tax advantages and exemptions, including fallen hero, disability, homestead, military, veterans, widow/widower, and limited income senior. There is also no state inheritance/ estate tax.
Homestead exemption
Florida's homestead exemption, which is based on one's principal place of residence, can significantly reduce the assessed value of properties, resulting in saving thousands of dollars on property taxes every year. Additionally, the exemption generously allows homeowners to transfer exemptions from one property to another. This is a wonderful feature as it allows homeowners to buy and sell freely without forfeiting the benefit of their established homestead exemptions. Young families find this very attractive as they "lock-in" this exemption at younger ages, and retain their exemptions as they move out of starter homes to purchase larger homes as their families expand.
Per SmartAsset, "it exempts $25,000 of a home's assessed value from property taxes, with an additional exemption of $25,000 for your home's assessed value between $50,000 and $75,000 for non-school property taxes."
One might assume that because Florida does not have a state tax income the local property taxes would be high. Fortunately, that is not necessarily the case. While property taxes are one of the primary sources of revenue for local governments in Florida, average Florida property taxes are still below the U.S. average. The same applies to Florida's state sales tax rate of 6% which is close to the national average. Florida's sales tax does not apply to medicine or groceries which is especially helpful to low-income earners, retirees, and everyone struggling with rising costs in the current inflationary environment.
Finally, for those worried that the government in Florida could suddenly change its tax laws, it is unlikely Florida would seriously consider adding a state income tax. It would require significant amendments to the state constitution, and there is little political motivation in the state to change the current policy.
South Florida is growing into a financial hub
With more people migrating to Florida to take advantage of the tax laws, South Florida in particular is fast-growing and developing into a robust financial hub. For those seeking remote work, exacerbated by the COVID-19 pandemic, people are increasingly finding Florida as a premiere destination. Families have discovered that it is entirely possible to escape high-risk urban regions in favor of family-oriented locations with less restrictions and mandates.
Florida tax laws are also beneficial to entrepreneurs attempting to grow their businesses. On average, small businesses in Florida benefit from lower business taxes. Additionally, favorable state demographics provide tailwinds for growth.
Retirees
Retirees are also a huge beneficiary of Florida's tax laws. Since there isn't a state income tax, retirement income becomes tax-exempt. There are no state taxes on Social Security, inheritance, estate, pension income, or income derived from your 401K or IRA. Retirees can better protect their nest egg in Florida than in most other states, which is essential when you are no longer working and not generating active income. No one wants to spend their retirement living somewhere that puts a strain on their finances, especially when there is an alternative featuring white sand, warm water, friendly people and frozen margaritas!