The Hidden Tax Costs of Relocating in Retirement
Here’s a big slap for the refugees in this country.
No, not the ones the news is talking about in the Southwest but the tax refugees from high-tax states.
When I moved south to Florida’s retirement belt five years ago, it wasn’t just because of better weather, no snow or even the low cost of housing.
No, the primary reason for my move (or at least the one I enjoyed the most when I got there) was taxes.
No state income tax, no crazy real estate taxes and no “rain tax.”
The year I moved, Maryland enacted a “rain tax.” Each year, an amount was added to your real estate tax based on the amount of rain the state estimated ran off your roof and driveway.
Is that crazy enough for you?
But now the new federal tax regulation that limits how much of your real estate tax you can deduct has put a major hurt on many people in these high-tax states.
And we’re not talking about taxes that are a little crazy. We’re talking about real estate taxes in the high five figures.
A friend of mine from New Jersey pays $60,000 a year. I had friends back in Maryland who owned 1,200-square-foot townhouses – not palaces – that were paying $16,000 and up.
No yard, no parking… but $16,000!
The amount of money the new law limits ($10,000 maximum of real estate tax deductions for individuals and couples) is going to cost these folks a bundle. And many aren’t sitting still for it.
These tax refugees are fleeing in droves to the states with no income tax and more reasonable real estate taxes.
But not so fast! Don’t get a U-Haul just yet.
The crazy high-tax states aren’t sitting back and allowing this exodus either. Many have implemented restrictions that negate the old “six months and a day” residency requirement for tax purposes. And you had better be sure about your own state’s rules before you move.
The tax-and-spend states are looking at business ownership, country club memberships, hunting and fishing licenses, voter registration, credit card addresses, and utility bills, to name just a few. Anything that will tie you to that state can be enough to continue taxing you at that state’s rate.
The days of just having a residence in Florida or Texas won’t set you free anymore.
And residency audits are no joke. They’ve been described as the most intrusive of all tax audits.
There have been reports of the tax man asking neighbors how much they have seen you around the neighborhood.
Holy Big Brother!
So if you’re among those who have had enough and want the flip-flops or Stetson lifestyle, come on down. But do your homework first.
God, do I hate those tax-and-spenders.