At Wealth Health, LLC, many of our clients have residences in both Ohio and Florida. As attorneys licensed in Ohio and Florida, we understand the differences in laws and taxes between Ohio and Florida so we can help you create a holistic plan to minimize tax liabilities and preserve your wealth.
Ten Points to consider:
- Domicile: The state you are domiciled in has a major impact on your financial future. See below for more information.
- Taxes: There are many differences in taxes between Ohio and Florida, most notably that Florida does not have a state income tax. See below for a further discussion of tax differences.
- Homestead: Florida’s comprehensive, yet complicated homestead laws can offer protection for your primary residence. See below to learn more.
- Ohio currently has a Business Income Tax Deduction which allows business owners to deduct 100% (starting in 2016) of business income from their adjusted gross income up to $250,000. This is a big advantage for small business owners.
- Florida recognizes Tenants by the Entirety for real property for married couples, Ohio does not.
- Florida no longer recognizes Springing Financial Powers of Attorney.
- The average cost of nursing home in Ohio is $6,388 per month, whereas the average cost of a nursing home in Florida is $7,200 per month.
- There is one-time $225 vehicle registration fee in Florida for vehicles that have never had a Florida registration. Registration fees in Ohio range from $35-$100 depending on the type of vehicle.
- The current sales tax rate in Ohio is 5.75% plus local sales taxes. The current sales tax rate in Florida is 6% plus local sales tax.
- Conveyance fees in Florida are $7 per $1000 (ex: $700 on a $100,000 property). Conveyance fees in Ohio are from $2-$4 per $1,000 (ex: $200-$400 on a $100,000 property). Thus, transferring a property in Florida costs about three times as much as in Ohio. Importantly, many counties in Florida impose conveyance fees even if you are merely refinancing.
The state you are domiciled in can affect the taxes you pay and your estate plan, so it is important to analyze which state you should be domiciled in based on your circumstances and goals. Your domicile is considered to be the state where you intend to return.
Ohio and Florida have both enacted laws to help determine where you are actually domiciled. The starting point in this determination is where you say you are domiciled. Although this factor is taken into consideration, your actions will further determine your place of domicile. Your actions are viewed in two different ways to form a totality of the circumstances analysis:
1) a statutory test 2) by a preponderance of the evidence.
The statutory tests:
Ohio looks to ORC Section 5747.24 to determine domicile. This statute basically says that if you spend two hundred and twelve “contact periods” in Ohio, then you are presumed to be domiciled in Ohio. If you spend less than two hundred and twelve “contact periods” in Ohio and you maintain a residence outside of Ohio, then you can create an irrebuttable presumption that you are domiciled outside of Ohio by filing a form with the Ohio Tax Commissioner to that effect.
Florida looks to its Code section 222.17 for its laws on determining domicile. The primary method under Florida law to establish your domicile is to file a Declaration of Domicile form with the Clerk of Court in the county where you reside. In Florida Code section 198.015 regarding Estate Tax it says, “For the purposes of this chapter, every person shall be presumed to have died a resident and not a nonresident of the state (a) If such person has dwelt or lodged in the state during and for the greater part of any period of 12 consecutive months in the 24 months next preceding death.”
Preponderance of the Evidence Test:
This test often turns on your answer to the question, “Where do you intend to be domiciled?”. In other words, where do the facts and circumstances of your actions show that you intend to be domiciled. In Ohio, the most important factor is where you spend your time. In Florida, the most important factor is whether the Declaration of Domicile form is filed.
So, the question becomes, how do you change your domicile to Florida?
Although there is no definitive way to change your domicile, at a minimum you should do the following:
- Change your driver’s license and automobile registration to Florida
- Use your Florida address on your federal, state, and local income tax filings
- Revise Wills and Trusts to reflect changed domicile
- Vote in Florida
- Establish social contacts in Florida
- Reduce real and personal property holdings in Ohio
- Reduce business activities in Ohio
- Reduce time spent in Ohio
- File the Declaration of Domicile with the county Clerk of Court
There are many different types of taxes, all of which should be considered before you make a final decision about your domicile. Tax liabilities are a real consideration that can greatly impact your income during life and your estate plan.
In Ohio, residents pay Ohio State Income Tax, which can be in excess of 5%, depending on your tax bracket. Ohio residents also pay city income tax, which varies by municipality, but can be as much as 3.5%.
Florida residents generally do not pay state Income Tax or city Income Tax. The absence of these taxes can mean thousands of dollars left in your pocket each year.
OHIO BUSINESS INCOME TAX DEDUCTION:
As of 2016, Ohio offers a Business Income Tax Deduction which allows business owners to deduct 100% of their business income from their adjusted gross income up to $250,000.00.
Estate tax is a tax levied on the net value of the estate of a deceased person before distribution to his or her heirs.
Ohio had an estate tax on assets that exceeded $338,333.00, however Ohio repealed their estate tax as of January 1, 2013. The estate tax was 6% on assets between $338,333.00 and $500,000.00 and 7% on assets exceeding $500,000.00. So, in Ohio, the tax on a $1 million estate would have been about $44,000.00.
Florida does not have an estate tax. The absence of an estate tax means large savings to individuals with moderate to large assets, effectively meaning more of your hard-earned money can be passed on to your heirs.
Local municipalities collect property taxes in both Ohio and Florida. These rates can vary by municipality and they are based on the value of the property.
Both Ohio and Florida have among the highest property taxes in the country, however several exemptions are available in both states which lower the property tax rate you actually pay. Among these exemptions are the homestead exemption, senior citizen exemptions, and veteran’s exemptions.
Florida’s homestead laws are comprehensive and complex, however they offer advantages to Florida residents.
In Florida, your home is truly your castle, and as such, it is given certain protections from creditors.
Homestead is essentially defined as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres outside a municipality.
In order to qualify for homestead protection you must:
- Be a permanent resident of Florida
- The property must be your principal place of residence.
Property purchased for seasonal and/or future use cannot be given homestead protection. The property must be held in your name or the name of your living trust. Property held in a business name or irrevocable trust will not be given homestead protection.
Homestead protection means that a creditor cannot force the sale of your homestead to satisfy a judgment, with a few exceptions. What makes homestead protection so valuable is that is an asset protection tool for your estate plan. Homestead protection protects your primary residence for your spouse and your children. It also has Medicaid protection up to $500,000.