Welcome to the Sunshine State, where seniors are soaking up the warm weather, pristine beaches, and endless golf courses. Florida is not only famous for its tropical lifestyle, but also for its favorable tax system. Here’s what you can expect.
An estimated 21.1% of Florida’s population is over 65 years old, one of the highest percentages in the United States. In its annual ranking of the best places to retire in 2021 and 2022, U.S. News listed eight Florida cities in the top 10 places to retire, with Sarasota, Naples, Daytona Beach, and Melbourne sweeping the top four spots. It’s no wonder retirees are flocking to this sunny destination.
If you’re considering Florida as a retirement destination, it’s essential to understand the state’s tax system and how it can impact your retirement savings.
In this blog, we’ll take a closer look at Florida’s tax laws, as well as other factors to consider before making your final decision on where to spend your golden years.
Is Florida Tax-Friendly for Retirees?
Florida’s tax system continues to make it an attractive retirement destination for seniors across the United States. With no state income tax, retirees can enjoy tax-free income from Social Security, pension income, and income from an IRA or 401(k). This alone can result in thousands of dollars in tax savings compared to other states.
In addition to the lack of income tax, Florida also has no estate or inheritance tax, making it an excellent option for seniors looking to leave assets to their loved ones. This favorable tax system allows retirees to make the most of their retirement savings and enjoy a comfortable lifestyle without worrying about excessive taxation.
Is Retirement Income Taxable in Florida?
Florida’s tax-friendly policies continue to attract retirees from all over the country, and for good reason. The fact that the state has no income tax means it doesn’t have state taxes on Social Security benefits, and there is no state income tax, which means that all earnings, whether from wages, pensions, or retirement accounts, are tax-free at the state level.
This favorable tax system can result in substantial tax savings for retirees, allowing them to enjoy a higher standard of living. Even if you have an IRA or 401(k) with accumulated savings from income earned in another state, if you move to Florida, your withdrawals will not be taxed.
How High is Florida’s Property Tax?
Property taxes are a significant source of revenue for local governments in Florida, but they are not excessively high compared to other states. Florida’s average property tax rate is 0.98%, which is slightly lower than the U.S. average of 1.08%. The average Florida homeowner pays $1,752 each year in real property taxes.
The property tax money collected by Florida is used for multiple public services throughout the state. It could be used for:
- First responders and other law enforcement
- General government services
- Local levies
- Municipal infrastructure and land construction or improvements
- Municipal employees’ pay
- Resident services like garbage pickup
- Recreational services
- Protective services
It’s essential to note that housing costs can vary significantly depending on the location in Florida. For example, in areas like Miami, housing costs are much higher than other parts of the state.
According to tax-rates.org, Miami-Dade County collects the highest property tax in Florida, levying an average of $2,756.00 (1.02% of median home value) yearly in property taxes, while Dixie County has the lowest property tax in the state, collecting an average tax of $503.00 (0.51% of median home value) per year.
In order for seniors to stretch their retirement dollars on housing, it’s crucial to research different areas and consider their budget before making a decision on where to retire in Florida.
What is Florida’s Homestead Exemption?
All legal Florida residents are eligible for a Homestead Exemption on their homes, condominiums, co-op apartments, and certain mobile home lots if they qualify. Florida homeowners can apply for the homestead exemption, which is a tax break applied to their primary residence. This exemption allows $25,000 of a home’s assessed value to be exempt from property taxes. For non-school property taxes, an additional exemption of $25,000 can be applied to a home’s assessed value between $50,000 and $75,000.
Not only does the homestead exemption lower the value on which you pay taxes, it also triggers the ‘Save Our Homes’ benefit which limits future annual increases in assessed value to 3% or less. The sale of the property, changes in ownership or changes to the property can cause the exemption and benefit to be removed or altered. (When a home is sold, the assessed value increases to market value for the next tax roll.)
Cost of Living
In addition to tax-free incentives, Florida’s cost of living is also relatively low compared to other retirement destinations. Making it an affordable option for seniors looking to stretch their retirement savings.
Furthermore, many real estate investments can help you get the most out of your retirement in Florida. Owning a vacation home comes with various tax advantages and opportunities for passive income that can fund your retirement.
Final Thoughts
What’s so great about Florida? Beyond its much-touted great weather, it’s affordable and it offers a high quality of life.
Are you considering retiring in the Sunshine State and unsure where to start? Tax planning is an integral component of your comprehensive retirement plan.
At APO Financial, our focus is on providing a thorough analysis of all relevant accounts to determine viable strategies for reducing taxation, ensuring that our clients retain a maximum portion of their funds. Our highly experienced Retirement income advisors in Florida Palm Beach Gardens are ready to guide you through the intricacies of Florida’s tax laws.
Contact APO Financial to get started on your retirement planning journey today.
© 2023 APO Financial. All rights reserved.
Disclosure: Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all.. Prior to making any investment, insurance, financial or legal decision, you should always seek individualized advice from a financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of your individual own situation Investment advice is offered through APO Financial Services, LLC (“APO") 10155 Westmoor Drive, Suite 175, Westminster, Colorado 80021-2627, an investment adviser registered with the Securities and Exchange Commission. Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services offered or that its personnel possess a particular level of skill, expertise or training. Important information and disclosures related to APO are available at https://apofinancial1.wpengine.com. Additional information pertaining to APO’s registration status, its business operations, services and fees, and its current written disclosure statement is available on the SEC’s investment adviser public website at https://www.adviserinfo.sec.gov. Information relating to annuities is intended for educational purposes only and should not be construed as comprehensive or all-inclusive. Therefore, it should not be regarded as a complete analysis of the subjects discussed and should not be used to make an investment decision. Annuities can be an important part of an overall portfolio but may not be appropriate for everyone. Before purchasing an annuity, it is important to understand the details of the product. Certain products may not be available in your state. The terms of each indexed annuity varies. It is always important to speak to a financial professional. about an annuity’s features, benefits and fees, and whether an annuity is appropriate for you, based on your financial situation and objectives. Participation rates, cap rates and/or index spreads may be subject to change by the insurance company according to the annuity contract provisions. If the insurance company makes such changes, this could adversely affect the return. Guarantees of an indexed annuity are backed by the claims-paying ability of the underwriting insurance company. The surrender charge period for a product may be longer, and the surrender charges may be higher than other annuity products. Indexed annuities are long-term investments. If the annuity contract is surrendered early, there is the possibility of a surrender charge being imposed and/or the funds may be subject to income taxes. The IRS may also impose a 10% penalty on withdrawals prior to age 59 ½, depending on the circumstances. With indexed annuities, there is the potential to lose money, depending on the product charges and minimum guarantee contract provisions. For additional information on annuities, reference the following websites: The FINRA (www.FINRA.org), the Securities and Exchange Commission (www.SEC.gov), Insured Retirement Institute (www.irionline.org), the National Association of Insurance Commissioners (www.NAIC.org) or your state's insurance department.