Q: My husband and I are fairly recent retirees from upstate New York. We bought a second home in Florida, and my husband is determined that we move our residence there. I’m fighting it to avoid the heat and spend more time with our family. How do you really determine the tax savings? At what point does it make sense?
A: Life in Florida can be appealing from a tax perspective: The state has no income tax and does not tax Social Security benefits, pension income or withdrawals from individual retirement accounts and 401(k)s. But you have to take into account all your income and costs, and your unique lifestyle preferences, in order to make a sound decision.
New York offers tax savings for some retirees, too. It generally exempts Social Security and state government pensions from income taxes, and eligible filers ages 59½ and older can exclude up to $20,000 of their income from private pensions and individual retirement accounts from their taxable income.
“Stack those up, and a lot of couples actually find their New York tax bill may be surprisingly modest, depending on the tax bracket,” said Steven L. Kennedy, a certified financial planner and principal with Albany Financial Group.
Still, high-net-worth retirees might have a good reason to relocate: Florida doesn’t have an estate tax, while New York taxes estates larger than $7.35 million. A move to Florida could lead to millions of dollars in tax savings for the next generation, Mr. Kennedy said.
You should prepare budgets for New York and Florida, with all your income and expenses, including utilities and property and car insurance, said Marianela Collado, a certified public accountant and chief executive of Tobias Financial Advisors in South Florida.
“It’s not necessarily a slam-dunk because you’re getting rid of income taxes,” Ms. Collado said, adding that by moving you could be picking up other expenses.
The numbers are important, but they aren’t everything. Be sure to list the pros and cons of living in each place when it comes to the overall climate, extreme weather events, time spent with family, social networks, hobbies and health care access.
If you decide to commit to a Florida residency and keep any New York property, be sure to work with a tax professional who can make sure that you follow the law. New York can audit you if it suspects that you intend to return. Also consider that if you have business or rental income in New York, you will still have to pay New York taxes.
