Donald Trump‘s Tax Cuts and Jobs Act of 2017 dramatically impacted the finances of property owners in high-tax states like New York. Consequently, Miami and other South Florida cities, which were already popular in part because of the state’s lack of income tax, have become even more attractive.
“The huge tax change at the end of 2017 really affected not only New Yorkers, but also property owners in states like New Jersey, Connecticut, Illinois, and California,” said Anthony Guerriero and Ricardo Mello, co-founders of Manhattan Miami Real Estate. “The change basically made owning a primary home in these states more expensive almost overnight.”
The tax act specifically capped the state and local tax (SALT) deduction at $10,000 beginning in the 2018 tax year, they explained. Before that, there was no cap. The “mansion tax” in New York, which kicked in last year, further squeezed property owners by imposing an additional fee for buyers of properties valued at $1 million or more. The tax is equal to 1% at the $1 million level and maxes out at 3.9% at $25 million.
“The taxes have really put pressure on prices in New York and other pricey cities,” said Mello. And, they spurred many a move south. “We’ve seen—and continue to see—a pronounced migration from New York, New Jersey, Illinois, and California to Florida, said Guerriero. not only for lifestyle which is nice but to reduce overall tax bill. The difference in taxes is tremendous and the prices in Florida are also a fraction of what you would pay in New York.”
Just how big is the disparity? Huuuuuuge.
“A Florida single resident making $10 million gets $227,619 in tax relief, while the same earner in NY gets socked with $257,177 tax hike because of the loss of SALT, under the new law,” said the New York Post. According to Kiplinger, Florida is the fourth-most tax-friendly state in the country.
Who’s moving to Florida?
CEOs. Industry leaders. Growing families. Upwardly mobile singles. They’re all driving migration from other states to South Florida. Yes, a vibrant retiree contingent remains, but it’s just one of the buyer segments settling in Miami and other Florida cities.
“A number of business heads are moving here,” said Mello, proving that South Florida is not just coveted as a personal tax shelter. “Barry Sternlicht is building his estate on Miami’s upscale North Bay Road and moving his Starwood Capital headquarters to Miami Beach. We’re seeing a lot of finance professionals, executives, attorneys and families coming to Miami and Palm Beach.” Hedge fund billionaires David Tepper and Edward Lampert are also making the move to South Florida, seeking a tax haven combined with an upscale lifestyle.
The New York Post noted that, “Many affluent New Yorkers already have second homes in Florida—so much so that New York hospitals such as NYU Langone and Mt. Sinai have opened up medical clinics there to tend to them.” But Mello and Guerriero are seeing more and more full-time moves.
“We are seeing a huge push, especially from New York,” said Mello. The reality is that some people will just never leave New York—for any reason. They’re willing to make the compromises, the tradeoffs. And then there are people, like clients of ours, who have been there for decades and are ready for a different way of life. We have one client who has been in New York for years and was previously in China. He was ready for a change, and we were able to find him a great two-bedroom direct oceanfront condo with all the amenities on the beach. It’s spectacular.”
Where are they moving
That type of resort-style living appeals to a wide range of buyers, and South Florida offers it in abundance. But it’s hardly the only way to live luxuriously in Miami. North Bay Road, where Sternlicht is building his manse, is considered one of Miami’s prime streets. Hibiscus Island, Star island, and Fisher Island continue to attract well-heeled buyers, many of them celebrities and professional athletes.
Coral Gables, Coconut Grove, and Weston are popular settings catering to upscale families—another growing contingent of buyers moving from other high-tax states, said Guerriero. “We are seeing a lot of growing families who feel like this whole tax situation is upsetting their kids’ inheritance or stripping away their college funds.” Brickell, which offers the closest approximation to Manhattan-style living you can find in Miami, and the up-and-coming art haven of Wynwood in the Miami Design District are two more hot areas of the city.
According to the most recent U.S. Census data, “Most domestic migrants that moved to the Miami metro area—almost 24,000—came from New York-Newark-Jersey City, most likely motivated by the proverbial sunny weather and the low taxation levels provided by Florida,” said STORAGEcafe.
But Miami proper isn’t the only recipient of the tax exodus. Per the Census data, the Miami-Fort Lauderdale-West Palm Beach metro area is No. 7 nationally for inbound migration. “The actual population change from 2017 to 2018 represents a significant growth of 49,000 people,” said STORAGECafe.
“Naples is also an attractive high-dollar area for those looking for a quiet setting,” said Mello. “And Fort Lauderdale and Palm Beach are two more high-end havens.”
Boosting personal income
The move from high-tax states has resulted in increased income for newly minted Floridians. “New data released by the IRS show that Florida experienced personal income gains of nearly $16 billion from new residents in 2018—a 3% increase from $15.5 billion in 2017,” said Florida Realtors. “Palm Beach County alone saw a 20% increase, according to the IRS, which tracks changes in personal income through address changes on annual tax returns.”
Dig further into that data and you’ll see that, “Florida gained more than $4 billion in net personal income from former New York residents alone in 2018,” said the South Florida Sun Sentinel. “South Florida also had a net gain in 2018 of $4.5 billion in personal income from $2.8 billion in 2017. The IRS data shows that New York lost $9.6 billion in net personal income that migrated elsewhere in 2018.”
