Why did Barron’s recently list Palm Beach among the Top 10 Best Places to buy your second home?
The weather is typically gorgeous and it doesn’t ever snow in Palm Beach. But, while the weather is nice, it is Florida’s Tax benefits that help make Palm Beach appealing to so many. Florida does not impose a personal income tax, an inheritance tax, gift taxes or intangible personal property taxes. Also, Florida has a Homestead exemption for primary Florida residents, this carries many benefits.
We all have to pay federal income taxes, but there are only seven states which do not levy a state income tax – and Florida is one of them! Federal taxes are 35% of your annual gross income. Many states will also tax an individual’s income – some states and even cities choose to levy a tax. The additional tax rates in New York and California are close to 45% of their resident’s annual income.
Florida does not impose a state inheritance tax (also known as an estate tax or death duty). What does this mean? When a person passes away, the gross value of their estate is subject to a Federal Estate Tax. Your estate’s gross value includes all property totally or partially owned such as: real estate, money, life insurance, annuities, stocks, bonds, accounts receivables and notes receivables, equipment, autos, furniture, artwork or jewelry. There is a varying monetary threshold at which the government will levy a tax. Those people that do not hit the monetary threshold for federal taxation can rack up thousands in state estate taxes; and the people who do hit the threshold, their heirs get taxed twice on their inheritance – but, not in Florida! Since changing this would require a constitutional amendment, chances of it altering are unlikely.
The gift tax is applied when you give away money or property. Let’s say you would like to help your children by giving them money towards a downpayment on a home. Anything given over $10,000 is subject to taxation. If the sale of an asset is for less than the full value, there is the potential for taxation. Lending money at interest-free or reduced interest may even have potential for taxation. Palm Beach residents do not need to worry about this tax, though. Each state will have exceptions, which may include an annual exclusion of the first $10,000 given to any one person. There is also an educational and medical expense exclusion. There is no gift tax on donating money to a political organization or charities, or when you are gifting your spouse.
Florida used to impose an intangible tax on personal property such as stocks, bonds, and other intangible property. In 2006, most parts of this legislature were repealed, and this tax has not been levied since in Florida.
The homestead exemption on your primary property protects the taxable value of the home, keeping it from increasing by more than 3% annually. The exemption also protects owners from creditors; if you lose everything, they can’t take your home.
Homestead exemption will also protect spouses in several ways. First, one spouse may not sell a property without the approval of the other spouse, even if the property is entirely in the name of only one spouse, or was purchased entirely from funds of one spouse. It also prohibits either spouse from devising the property by will, if the home owner is survived by a spouse or a minor child. Finally, the exemption automatically attaches to the surviving spouse.
There are many tax benefits available to Florida residents, even our sales tax is low!
With homestead benefits, no personal income tax, no inheritance tax, no gift taxes nor intangible personal property taxes, Florida is a ideal place to save your hard earned dollars. You should talk to a tax specialist to find out what other benefits you can gain by purchasing a home in Florida.
Disclaimer: This article is for information purposes only. It should not, in any way, be construed as tax advice. One should always consult a licensed tax preparer to find out the tax implications for your particular situation.