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Billionaire Ken Griffin just made the largest gift any individual has ever given to higher education: $3 billion to Carnegie Mellon University, including $2 billion to build a new campus in Miami. (1)
Griffin moved his family and his firm, Citadel, from Chicago to Miami in 2022. “The best thing I ever did was move to Miami for my kids,” he told Fortune. (1)
He insisted taxes weren’t the reason, citing “great schools, a great environment” and streets that are “safe and clean.” (1) I’ll take him at his word.
But plenty of retirees are moving to Florida for exactly the reason he says he didn’t. Florida doesn’t impose a personal income tax, an inheritance tax or a gift tax. (2)
I’ve been a CPA since 1981, and I own a home in Fort Lauderdale. I like it here. But I’ve watched a lot of people move south expecting a big tax windfall and find a much smaller one.
The reason: your old state may tax less than you think, and Florida charges in ways your old state didn’t. Florida’s average home insurance bill is more than double the national average. (3)
Here are five costs retirees miss when they move for taxes.
1. Your old state may not tax your retirement income anyway
Take Griffin’s old home, Illinois. It has a state income tax, but it lets you subtract Social Security, qualified pensions, 401(k) payouts and IRA distributions. (4)
So a retiree living on those sources who leaves Illinois for Florida may save little or nothing in state income tax. Several other states go easy on retirement income, too.
Before you move, have someone figure your actual state tax bill on your actual retirement income, not your old paycheck.
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2. Home insurance can swallow the savings
This is the one that stings. Florida homeowners pay an average of $6,408 a year for $300,000 in dwelling coverage, according to Insurify. The national average is $2,808, and Illinois is $2,568. (3)
That’s about $3,800 a year more than an Illinois homeowner pays for the same coverage. For many retirees, that wipes out a big chunk of the state tax savings.
Shop before you buy, and shop again every year. Home insurance rates have exploded — and if you haven’t shopped around lately, you’re almost certainly paying too much. Loyalty doesn’t pay; your insurer is counting on you never checking.
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3. Property taxes reward people who stay put
Florida’s property tax rules are generous, but only to full-time residents. If the home is your primary residence, you can get an exemption of up to $50,000 off its assessed value. (2)
After that, the Save Our Homes rule limits annual assessment increases to 3% or the change in inflation, whichever is lower. (5)
The catch for newcomers: You start at today’s market value, and a second home doesn’t get these breaks. The neighbor who bought in 2005 may pay far less than you on the same street.
4. You have to prove you really left
Your old state won’t just take your word for it. Florida says filing a declaration of domicile, qualifying for the homestead exemption or registering to vote can establish residency. (2)
Do all three, and more: Get a Florida driver’s license, move your doctors and bank accounts, and keep a record of the days you spend in each state. If you keep a home up north and spend most of the year there, your old state may decide you never left.
5. Your estate documents may need a redo
A move to a new state is a good time to review your will, power of attorney and health care directive. States have different rules for how these documents are signed and witnessed, and a bank or hospital in your new state may balk at an out-of-state form.
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The bottom line
Ken Griffin can afford to move anywhere for any reason. Most retirees have to make the math work.
Move to Florida for the beaches, the grandkids or the winters. Those are great reasons, and I’d know. I love it here. But if you’re moving for the taxes, add up everything first, including the insurance bill.
The sunshine here is free. Almost nothing else is.
Sources: 1. Fortune; 2. Florida Department of Revenue; 3. Insurify; 4. Illinois Department of Revenue; 5. Florida Department of Revenue
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