Each state (and the Federal District) have their own taxing authority. Cities and counties also have their own revenue departments, that raise money from their local population. As businesses grow, they interact with more and more of these tax authorities, making State and Local Taxes (known by the acronym SALT in the accounting industry) a challenging area that firms completely specialize in.
Because we specialize in helping individuals and businesses relocate to income tax free Florida from high tax states, we spend a lot of time dealing with how New York State taxes (and New York City’s city taxes) apply to our clients and their companies.
These high tax locales hate losing their high earning (and tax paying citizens), and will often challenge your residency if you have extensive assets in your former state. We often help new (and prospective) Floridians move their tax residency to Florida, making sure to dot every “I” and cross every “T” to prevent their former states from attaching their taxes to our clients’ income.
During the The Tax Cuts and Jobs Act of 2017 (TCJA), also known as the Trump Tax Cuts or Tax Reforms, SALT taxes went from fully deductible to being capped at $10,000 per year. For most taxpayers this had little impact, but for high earners in states and cities with high tax rates, this change created a significant impact on their taxes. Because of the reduction in rates, most taxpayers still saw a reduction in taxes owed, but for high income earners in New York, New Jersey, or California, they found that their taxes were largely impacted by the tax code changes.
In contrast, areas like Florida with no state income tax watches their residents receive substantial tax reductions. During the pandemic, this economic impact combined with Florida’s relatively open economy caused many people to consider moving to Florida.
There are many non-financial reasons to move to Florida, like a growing economy, beautiful beaches, fantastic weather, and a uniquely multinational culture. However, the tax impact of the move often helps people make their financial decision. If you are considering the economic impact of moving to the Sunshine State, schedule a meeting with us to discuss what the tax impact will be.