![](\"https:\/\/nwfl4sale.com\/wp-content\/uploads\/2020\/02\/foreclosure-2.jpg\")
<\/p>\n<\/p>\n
<\/p>\n<\/div>\n<\/div>\n<\/div>\n
NAPLES, Fla. \u2013 The Sunshine State can offer more than just sunshine for prospective homebuyers. While the climate has always been a big draw for new residents, another element has led many in recent years to relocate to Southwest Florida: taxes.<\/p>\n
Local professionals say that the Southwest Florida real estate market has seen a significant boost thanks to people migrating from northern states with much harsher tax environments. Residents who have lived for decades in states such as New York have taken advantage of an opportunity to find relief in Florida, where the tax burdens are less heavy.<\/p>\n
\u201cNobody, as far as I know, likes to pay more taxes if they can pay less,\u201d said Tony Lachowetz.<\/p>\n
Lachowetz, 61, moved down to Florida in November 2018 after retiring as a University of Massachusetts Amherst business professor. He lives in Florida about six and a half months of the year, which allows the educator to establish residency in the state. The remaining months of the year, he spends in Massachusetts where he still has family and a second home. Lachowetz also continues to remotely teach a few online courses for the university.<\/p>\n
He said the decision to move was, in part, motivated by the savings he could find to the south.<\/p>\n
\u201cIt\u2019s just a cost of living move,\u201d he said. \u201cYou immediately get real estate tax breaks through the homestead (exemption). You also immediately get a state income tax break.\u201d<\/p>\n
Homeowners in Florida can claim an up to $50,000 homestead exemption on their primary residence, which reduces the assessed value of the residence and the property tax that the owner pays.<\/p>\n
Lachowetz said he\u2019s also been able to save about $7,000 per year thanks to the fact that Florida has no personal income taxes.<\/p>\n
According to New York City-based personal finance technology company SmartAsset, \u201chomeowners in Massachusetts face some of the largest annual property tax bills of any state in the country,\u201d and the state has an average effective tax rate of 1.22%, which is higher than the national average of 1.08%.<\/p>\n
Florida\u2019s average effective property tax rate sits at 0.98%, lower than the national average, according to SmartAsset.<\/p>\n
\u201cI was excited about the prospect of not having to pay (income tax) anymore and paying a real estate tax that, as a percentage of the value of my home, is about half of what I\u2019m paying in Massachusetts,\u201d Lachowetz said. \u201cThe prospect of coming down here and eliminating some taxes or reducing some real estate taxes by quite a bit, that certainly got my attention.\u201d<\/p>\n
And while Lachowetz just has the refrigerator and heat on in one room of his Massachusetts house, he\u2019s still dishing out more in electric bills than in the Florida house that he is fully utilizing.<\/p>\n
\u201cI pay about half in utilities as I do in Massachusetts right now, and I\u2019m not using my house in Massachusetts,\u201d he said of the northern home that is about half the size of his residence in Florida. \u201cThat\u2019s just how high the electric rates are right now.\u201d<\/p>\n
Lachowetz said he\u2019s noticed that states like Massachusetts and New York are losing population \u201cevery year.\u201d<\/p>\n
\u201cCalifornia is losing so many people and so many businesses every year, and people are moving to low-tax, low cost-of-living states like Idaho, Texas and Florida.\u201d<\/p>\n
Between 2017 and 2018, almost 23,000 people moved to Lee and Collier counties, and most of those people migrated from somewhere else in the U.S, according to U.S. Census Bureau estimates.<\/p>\n
\u201cThere\u2019s a reason (for the population growth),\u201d Lachowetz said. \u201cIt\u2019s not just the weather.\u201d<\/p>\n
\u201cOther states are getting less tax-friendly,\u201d said Katherine Loughead, a senior policy analyst with the Tax Foundation, a Washington, D.C.-based think tank. \u201cFlorida has been pretty competitive for a while now, having never had an individual income tax. Other states are increasing their income taxes or creating new, more burdensome taxes, and that drives a lot of people out of state.\u201d<\/p>\n
In fact, the Sunshine State ranks fourth in the nation on the foundation\u2019s 2020 State Business Tax Climate Index, which Loughead said measures how competitive state tax structures are.<\/p>\n
\u201cThere are only three states that have a more competitive overall tax code that is friendly to businesses and makes taxpayers feel they are being treated fairly,\u201d she said. One of the most prominent reasons for Florida\u2019s high ranking is the total lack of an individual income tax, she said.<\/p>\n
Loughead noted that taxes on income are generally more harmful to economic growth than taxes on consumption or on property \u201cbecause income taxes penalize that next dollar of investment.\u201d<\/p>\n
She stated that the corporate income tax is also \u201cpretty competitive compared to a lot of other states.\u201d Florida\u2019s corporate tax has a relatively low rate and is a flat tax, meaning that it\u2019s not a graduated rate that will charge higher amounts for those who earn more, she said. Compared to states such as New Jersey, which has a top statutory corporate tax rate of 10.5%, Florida\u2019s 4.458% is relatively affordable for businesses.<\/p>\n
According to Loughead, Florida is also for wealthy retirees as it doesn\u2019t have estate or inheritance taxes, commonly referred to as \u201cdeath taxes.\u201d Therefore, \u201cit\u2019s a good place for retirees to go if they don\u2019t want taxes levied when they transfer their estates or make big gifts to their descendants.\u201d<\/p>\n
Despite all of Florida\u2019s advantages, she noted that there is still plenty of room for the state to be even more tax-friendly. She mentioned the tangible personal property tax, which applies to the value of tangible property such as equipment used in a business. The Florida Department of Revenue defines tangible personal property as \u201call goods, property other than real estate, and other articles of value that the owner can physically possess and has intrinsic value.\u201d Therefore, the tax commonly applies to assets such as business equipment, furniture, and automobiles, according to the Tax Foundation.<\/p>\n
\u201cIt\u2019s really the land and improvements and buildings that should be subject to the property tax,\u201d she said.<\/p>\n
Loughead also referenced the bonus depreciation deficiencies that Florida has. Bonus depreciation is an incentive in which businesses can deduct a large percentage of the price of certain assets, instead of writing them off over the life of those assets.<\/p>\n
She said that under the Tax Cuts and Jobs Act of 2017, when a business invests in machinery and equipment, it can write off 100% of that investment in the first year, while Florida code only allows 14%.<\/p>\n
\u201cBusinesses are getting more of a benefit on the federal level than they are on their Florida corporate income tax returns,\u201d she said. \u201cThat basically increases the cost of capital and makes it harder for businesses to invest in machinery and equipment. It\u2019s kind of an added penalty for in-state investment. It\u2019s levied the hardest against those that have big capital expenditures in the state of Florida.\u201d<\/p>\n
Lastly, she said that the sales tax in the state should be \u201cbroadened and modernized\u201d based on the fact that it currently does not apply to a numerous amount of services. She said that services such as dry cleaning, barbershops, parking, landscaping and others are exempt from the sales tax.<\/p>\n
\u201cIt would make sense for the sales tax to apply neutrally to a broad base of final consumer goods and services,\u201d she said. \u201cThat would generate more revenue to bring down the overall sales tax rate or other tax rates.\u201d<\/p>\n
\u201cIt\u2019s definitely been a positive for our market,\u201d said Bob Quinn, a Realtor with The Re\/Max Realty Team Office in Cape Coral who represented Lachowetz in his home purchase. \u201cIf someone can save enough in taxes, it becomes a big plus for them, especially in retirement if you can reduce your income taxes by moving from a high-tax state to Florida. It just makes a lot of sense for people.\u201d<\/p>\n
He said he\u2019s met more buyers in recent years who have relocated to Florida to escape some of those conditions.<\/p>\n
Quinn moved to Southwest Florida in the late \u201870s and said that back then, the population of Cape Coral and throughout the region consisted of mostly retirees from the Midwest. The reason for making Florida their new home was to escape the harsh winters, and often, their Southwest Florida home was a second, seasonal residence. Many of these buyers would still maintain their primary residence up north.<\/p>\n
This has changed, however, in recent years, Quinn said, as the cost to maintain two homes rose and residents opted to just keep their Florida locations due to the lower taxes.<\/p>\n
\u201cThis is especially true as northern property and income taxes kept rising,\u201d he said. \u201cOver time, it became a tax issue. People are still moving here to get out of the cold and snow, but escaping from a high-tax state has become another priority for people.\u201d<\/p>\n
He also mentioned that technological advances have allowed people to keep their jobs from the North, work remotely from their new homes in Florida and still receive the tax benefits.<\/p>\n
Quinn stated, however, that some of these high tax states are taking a \u201cclose look\u201d at people who migrate to Florida or other southern states. He said due to this, residents who relocate need to \u201cgo about it the right way.\u201d<\/p>\n
\u201cYou start seeing a lot more of these really intrusive residency audits,\u201d he said. \u201cThere\u2019s a growing probability that their former high-tax states are going to take a real close look at them to make sure they\u2019re legitimate Florida residents. They are trying to grab that tax revenue back from all the people who have left their states.\u201d<\/p>\n
He said that the extent of this doesn\u2019t just include states going after people while they\u2019re alive but also going after their estates and heirs after they pass away.<\/p>\n
Quinn suggested that new residents consult with a Florida-based certified public accountant and a Florida-based estate planning attorney when they relocate.<\/p>\n
Bill Earls, a John R. Wood agent who regularly handles some of the priciest listings in Naples, agreed that the escape from tax burdensome states is boosting the local market.<\/p>\n
\u201cIt\u2019s no question that \u2018tax refugees\u2019 coming here is another shot in the arm for us,\u201d Earls said. \u201cI think a lot of these people who are smart, economically successful people, they see the writing on the wall. Those northern governors where they see income flights from their states, they\u2019re going to raise taxes again. The fact that people are moving here to get away from the tax burden in northern states is palpable.\u201d<\/p>\n
He said that while some of the less wealthy individuals may be moving down to Florida to capitalize on the financial opportunity, some of the wealthiest are also getting involved in the trend.<\/p>\n
Earls stated that some titans of industry are fed up with the tax burdens of other states and are making a statement by moving to the Sunshine State. He mentioned President Donald Trump, who recently switched his primary residence from Manhattan to Palm Beach. The president tweeted after the news was released, noting the \u201cmillions of dollars in city, state and local taxes\u201d he pays each year in New York.<\/p>\n
\u201cDid he do that because he needed to and couldn\u2019t afford to pay?\u201d Earls asked. \u201cNo. But I think he\u2019s just had it. It\u2019s almost like a protest movement, not buying into New York\u2019s debacle anymore.\u201d<\/p>\n
Pablo Veintimilla, the Southwest Florida market president for Centennial Bank, said that Florida commercial and residential construction came to a \u201cscreeching halt\u201d when the 2008 financial crisis hit, leading to a lack of new residents.<\/p>\n
Now, with the economy\u2019s recovery and the cost of living rising in northern states, the building has begun again, Veintimilla said. \u201cNow we\u2019re back to migration,\u201d he said. \u201cThere\u2019s still a lot of land in Florida. And they\u2019re building all these homes and now they\u2019re coming down. And we see now a lot of construction happening here again. They\u2019re anticipating this demand, and they\u2019re continuing to build.\u201d<\/p>\n
Along with the demand, the current low-interest-rate environment for mortgages allows new residents to purchase more than what they anticipated, he said. This, combined with the lower cost of living in Florida, makes the area even more appealing.<\/p>\n
\u201cThe people who are moving here and looking to buy a home, because the interest rates are so low, they can afford more of a home,\u201d he said.<\/p>\n
This great Florida migration does have some unintended consequences, however.<\/p>\n
\u201cThat migration here is causing the rise of real estate prices,\u201d Veintimilla said. \u201cYou have a large segment of the population \u2013 teachers, firefighters, policemen \u2013 starting to get priced out of the market.<\/p>\n
\u201cAffordable housing is a big challenge here.\u201d<\/p>\n
\u00a9 2020 Journal Media Group, Andrew Wigdor. This article will be available for 30 days following publication.<\/p>\n<\/div>\n<\/div>\n