Everyone knows that Florida is a great place to reside, what with its tropical climate, incredible beaches, and sunny skies. And what many people are also aware, it is a fantastic place to settle down, or just start anew in a sensational location. Why you ask? In a word, taxes, or better said, the lack thereof! Our great state of Florida has no personal income tax, which basically means you can retain 6 to 13 percent more of what you made, especially compared to such high tax states like New York or California. And that’s not the only benefit. Florida has no estate tax, so when you die, more is able to be left to your heirs.
But establishing Florida residency is just half of the story. Now while there are definite rules for establishing domicile here in Florida, you must also take steps in order to make sure that you will no longer be considered a resident from which the state you plan to leave. There have been plenty of cases where clients have been considered to be residents of Florida as well as the state they departed. (New York State is famous for taking this position). This means the prior state may continue to pursue claims for state income or estate taxes, as well as filing liens or garnishing financial accounts. It is therefore extremely important that the proper steps are taken to cut residency status from your former state. This is a two part process then, and it is critical] to know what is required under each part in order for you to be successful.
Many Northern states will apply both a “Statutory Resident Test” in addition to a “Domiciliary Test”. The Statutory Resident Rule is often the one that most people who relocate to Florida are familiar with. There is the belief that as long as one resides in Florida for “183 days or more” then Florida residency is established (and the departed state residency is terminated. But, it is not that easy. The burden falls on you to prove the number of days you have spent outside of your departed state. For example, states can challenge your location days by verifying charge card or telephone records.
Where the Statutory Residency Test focuses on just your residence and the number of days in each state, the Domiciliary Test will focus on five distinctive areas including your physical residence, the amount of days spent physically within each state, your place of business, connections that are “near and dear” to you, and finally, the location of your family members. These rules can be complex and indirect, so proper advice is key.
We can help you navigate the transition of your business from your current state to Florida, by guiding you through the maze of entity selection, tax structures, employment and sales taxes, business registrations and licensing, residency issues, and all of those details that can seem overwhelming.
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