The Real Cost Of Retiring In Florida: Insider Tips For Newcomers From A Wealth Adviser Who Lives There

I've lived in Florida for more than 30 years. In that time, I've watched thousands of people move here to retire — and I've seen a smaller but steady number of them get surprised by tax rules and costs they didn't know existed.

Most of these surprises are avoidable. You just need to know where to look before you need the answer, not after

As a wealth adviser, here's what I tell people at Evolution Retirement Services' seminars on retiring in Florida, boiled down to the basics.

'Snowbird' isn't a tax status

Spending winters in Florida and summers up north feels like the best of both worlds. But if you still own a home, register to vote or hold a driver's license in your old state, you may still owe that state income tax — even while soaking up the Florida sun six months a year.

Florida has no state income tax. That's a big reason people move here. But "no state income tax" only applies to Florida residents. If your old state still considers you a resident, too, you can end up filing (and owing) in both places.

The fix isn't complicated, but it does require some legwork:

• Spend more than half the year here. Most states use a 183-day rule. Keep a simple calendar or travel log — it matters more than people expect if you're ever questioned.
• Move your legal documents. Your driver's license, voter registration and vehicle registration should all point to Florida.
• File a declaration of domicile. This is a short form at your local county clerk's office that formally states that Florida is your permanent home. It costs very little and takes only a few minutes.
• Update your estate documents. Your will, power of attorney and healthcare directive should be reviewed by a Florida attorney, since some states have different requirements.
• Cut the cord, don't just add a state. If your old state's tax authority sees you keeping a home, a library card, a doctor and a bank account there, they may argue you never really left. Some states are aggressive about this; it's worth taking seriously.

Homestead exemption: Don't leave this money on the table

If Florida is your permanent residence and you own your home, you likely qualify for the homestead exemption. It reduces the taxable value of your home for property tax purposes — often by $50,000 or more.

It also caps how much your assessed value can increase each year (called the Save Our Homes assessment limitation), even if your home's market value jumps.

A few things people miss:

• You have to apply — it's not automatic. The deadline is typically March 1 of the year you want the homestead exemption applied.
• The exemption only applies to your primary residence. A vacation condo or rental property doesn't qualify.
• The exemption is tied to you, not the house. If you move, you'll need to reapply at the new home. (Florida does allow you to carry over some of the Save Our Homes benefit, however. This is called "portability.")
• Other exemptions. Widows, widowers, veterans and people with disabilities may qualify for additional exemptions on top of the standard homestead benefit.

Other traps we often see

Estate and inheritance tax exposure from your old state. Florida has no estate or inheritance tax. But if you still own property, a business interest or certain accounts tied to a state that does, that exposure may not disappear just because you moved.

Insurance costs catching people off guard. Florida's homeowner's insurance market has gotten more expensive and, in some areas, it's harder to find coverage at all. This isn't a tax, but it's a real cost of living here that surprises transplants used to lower premiums up north.

Flood insurance is a separate policy and separate cost — don't assume it's included.

Assuming "no income tax" means "no taxes." Florida makes up revenue through other channels — property taxes, sales tax and insurance costs among them.

For most retirees, the math still favors Florida, but it's worth looking at your full picture rather than assuming income tax is the only line that matters.

Timing the move around tax season. If you move midyear, you may owe part-year taxes in your old state. Working with your tax preparer to time the transition — and to gather the paperwork trail (utility bills, mail forwarding, that declaration of domicile) — can save real headaches if your prior state asks questions.

The bottom line

Florida can be a genuinely smart move for retirees, both financially and for quality of life. I've watched it work out well for most people who plan for it properly.

The retirees who run into trouble are almost never the ones who moved here for the wrong reasons; they're the ones who assumed the paperwork would take care of itself.

If you're planning a move to Florida or you moved here and aren't sure you've closed the loop on residency, it's worth a conversation with both a tax professional and a Florida estate attorney before your first tax season here.

Related Content

• Thinking of Retiring to Florida? These Hidden Costs Could Drain Your Budget
• The Rise of the 'Half-Back' Retiree: Why a Perfect Florida Condo Isn't Enough
• Are No Income Tax States Better to Live In?
• I'm a Financial Adviser: This Is the Real Secret to Retirement Success
• Is It Time for Retirees to Break Up With Bonds?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.