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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3895
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I want to change my residency to FL to avoid 5% Income Taxes

Resolved Question:

I want to change my residency to FL to avoid 5% Income Taxes from our State. My husband does not. We have all investments jointly now except for IRA's. We are retired. Would I have to change ALL investments to ONLY my name to accomplish this? My husband's income is Social Security & small pension check so he would pay very little in income taxes to our State.
Would this complicate our Estate? Or is just simpler to both change residency to FL?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi,

NPVAdvisor :

I'm not sure I completely understand your question ... If you are asking about only YOU moving to FL, then, yes, changing the investments to your name so that there would be not state income tax on the investment income (if you were a resident of Florida) WOULD accomplish that purpose.

NPVAdvisor :

Understand that this would essentially be a gift ... but the gift tax exclusion is now at 5,250,000 so that may not be an issue

NPVAdvisor :

Both of you simply moving and chan ging your domicile to FL would most certainly be the most adventageous

NPVAdvisor :

no state tax on ANYTHING

NPVAdvisor :

and all of nthe issue around probate and so forth would all be in one state

Customer:

We live in FL 6 or more months each year. We know of other couples who have done this, but I didn't knowhow much legal

NPVAdvisor :

Another thought, once you start taking money from the IRS, that's ordinary income, and that would also save money on state taxes

Customer:

work it would take to separate all our investments. You think it would simplify Estate planning, etc. to both move to FL?

Customer:

When we take money?

NPVAdvisor :

Let me look up the residency requirements for IL ... just a sec (sometimes that's the problem... you really have to truly change your domicile to legally change your residence for tax purposes ... just one minute

NPVAdvisor :

On the estate planning, yes,

NPVAdvisor :

tru;y moving to FL would eliminate the need for what's called ancillary probate

NPVAdvisor :

if you don't have proerty in 2 states

Customer:

We own our home in IL

NPVAdvisor :

The, unless you sell, you'll have a hard time proving that you're not really IL residents

Customer:

We also own our property in FL where we park our trailer 6 or more month per year

Customer:

We know many couples who own a condo or home in their home State but stay more than 6 months in FL and have become FL residents to avoid their State's Income Tax.

NPVAdvisor :

Here we go: .... yes, I understand .. but when faced wit the decision of where you call home, the states that do have income taxes make it hard for you not to fit their definition of resident

NPVAdvisor :

Here we go:

NPVAdvisor :

Thay may say they jave.... ut it comes down to how the Drpt of revenue defines residency

NPVAdvisor :

See this:

NPVAdvisor :

Looks like you may be OK if you have no EARNED income

NPVAdvisor :

see tyhis from IL:

NPVAdvisor :

a retired Illinois resident who filed a federal return, you must file Form IL-1040. However, certain types of retirement income (e.g., pension, Social Security, railroad retirement, governmental deferred compensation) may be subtracted from your Illinois income. For more information, see the instructions for Line 5 and Publication 120, Retirement Income.



a part-year resident,
you must file Form IL-1040 and Schedule NR, Nonresident and Part-Year Resident Computation of Illinois Tax, if



  • you earned income from any source while you were a resident,

  • you earned income from Illinois sources while you were not a resident, or

  • you want a refund of any Illinois Income Tax withheld.

NPVAdvisor :

Ahhh, I lso just found this.... looks like IL isn't neary as aggressive about this as say NY or CA

NPVAdvisor :

Who is an Illinois resident?




You are an Illinois resident if you were domiciled in Illinois for the entire year. Your domicile is the place where you reside and the place where you intend to return after temporary absences. Temporary absences may include duty in the U.S. Armed Forces, residence in a foreign country, out-of-state residence as a student, or out-of-state residence during the summer or winter. If you are absent from Illinois for one year or more, we will presume you are a nonresident of Illinois.


NPVAdvisor :

Note: If you filed a joint federal return and one spouse is an Illinois resident while the other spouse is a nonresident or a part-year resident, you may file separate Illinois returns. If you file a joint Illinois return, you will both be taxed as residents.

NPVAdvisor :

But, of course filing as separate is never as adventageous, in terms of standard dedution

NPVAdvisor :

sorry for the typo (standard deductions)

Customer:

Looks to me that we will gain a lot by both becoming FL residents and file no Illinois forms. Only Federal Forms

Customer:

Are we done?

Customer:

Are we done?

NPVAdvisor :

Sorry, yes, I would agreee.... was looking to be sure nothing else would hang you up

NPVAdvisor :

BUt, again, yes in your situation, especially as you begin to pull on those IRAs you'll msave that full amount of IL tax

NPVAdvisor :

"Save" that full amount ...

Customer:

We do own property in FL for 8 years, pay taxes every year and have an address. I don't think there will be a problem. Yes, and the interest we get from Tax Exempt Municipal Bonds IL makes us add to income. I forgot about that IRA money also.

NPVAdvisor :

Nothing illegal there at all, based on ILs definitions

Customer:

Thanks.

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3895
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 7 other Tax Specialists are ready to help you

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