No Income Tax
In my last blog post, I answered a question from a man in Massachussets about capital gains tax. As explained by co-author Brad Galbraith, capital gains tax is a part of income tax, which, under Florida law there is none! A domiciled resident of Florida is only obligated to pay FEDERAL income tax, so capital gains would be reported for federal income tax purposes. There is no separate Florida income tax form to fill out. Period!
Topping the list of reasons – aside from the amazing weather – why a permanent move to Florida is a good idea is no state income tax. In fact, the Florida Constitution prohibits the imposition of a state income tax. And unless the people vote to have a state income tax, it is doubtful that there ever will be one.
Interestingly, there are only eight other states in the entire US that do not impose personal income tax: Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In Florida, no state income tax means that any revenue generated from employment or investments are free from government deductions and/or levies. On the other hand, if you decide to move to Vermont, for example, your state income tax will range from 3.6 to 9.5 depending on the amount or level of income.
Here’s another example: Let’s take a married couple who have an individual income of $70,000 and a combined interest income of $150,000 which amounts to a total adjusted income (AGI) of $150,000. In Florida, this couple will get to spend a total of $150,000 should they choose, if they have no itemized deductions. However, in other states, total earnings will not be as much.
Michigan tax = $6,525 (flat tax at 4.35% of $150,000)
California tax = $11,323 (graduated tax)
Pennsylvania tax = $4,605 (flat tax at 3.07% of $150,000)
Further, Florida residents enjoy tax-free income sourced from work or property in other states either as salary or real estate rental earnings. Other states however, will be imposing their own income tax on those same earnings. That means, your earnings as a Florida resident are free to grow and be reinvested without an additional state-imposed income tax.
For more information on taxes in Florida, purchase a copy of The Florida Domicile Handbook or email mike@kilbournassociates.com.
Dear Florida, I live in California in the United States, and I did not realize that Florida was special because it had no income tax. I thought O.J. just liked the homestead exemption. So do California and the United States actually HAVE income tax. Is that why I keep getting so much mail from the IRS and the California Franchise Tax Board. I try to keep the men in dark suits one step behind me by always telling them I am in the wrong place in my log (“blog” is not a word), http://www.waronnothing.com. Right now I am in South Beach in Miami. Love your blog, maybe I will move to Florida. Or maybe I already did? LOVE YOUR BLOG! Hope you get everyone to move to Florida. Good luck. Big M.