Out-of-state buyers are flocking en masse to Florida with plans to establish residency in order to avoid shelling out money to the government as a result of last year’s tax reform, brokers and developers told The Real Deal in this June’s 2018 article.
New York, New Jersey, Connecticut, California and Illinois — places with state income taxes as high as 13.3 percent, and even city taxes in the case of New York City. Florida, on the other hand, has no state income tax.
In the U.S., the vast majority of states levy income taxes. For those earning at the top level, the state taxes can be as high as 8.82 percent in New York; 8.97 percent in New Jersey; 6.99 percent in Connecticut; and 4.95 percent in Illinois. California has the highest state income tax in the nation, topping out at 13.3 percent for those earning more than $1 million.
The Tax Cuts and Jobs Act, passed in December 2017, limited the ability of taxpayers to deduct state and local taxes (SALT) from their federal taxable income in 2018. That has dealt a significant blow, experts said.
Changing state residencies to avoid these taxes is not an easy task. You must provide proof that you are not in your former home state for more than 180 days a year. And to establish residency in Florida, you must secure a driver’s license and follow other legal requirements. Florida also has property taxes of about 2 percent of the assessed value, which is a lower rate than that of about half of the states in the country.
According to April figures from the Miami Association of Realtors, people from New York City ranked first among all cities searching for properties on MiamiRealtors.com. California ranked as the top state.
Real estate insiders say that while a handful of other states — including Alaska, Nevada, South Dakota, Texas, Washington and Wyoming — do not currently have an income tax, Florida is often viewed as the most desirable residence with zero state income tax plus property tax rates that decline with the age of the owner.
Incentives are also a factor for sales. On the new construction side, developers are offering buyers sweeteners to close deals.
For projects that are nearly or just completed, developers are including the finishing touches for buyers — offering to throw in flooring and wall treatments that wouldn’t normally come with a new unit.
