Florida’s in the tax driver’s seat

Castles in the Sand

It’s almost tax time again so why not talk again about Florida’s advantageous tax position and the influx of new residents. I like to tie in our growing population with real estate sales statistics since it’s my opinion there’s a direct correlation between the two. I’ll also report the January sales in this column.

But first, it’s been two years since the new tax law was signed and we’re just starting to see the effects. Local economies and housing markets are motivating residents of high tax states to relocate to more tax-friendly states like Florida with no state income tax. Even though the tax overhaul resulted in many people experiencing lower taxes, homeowners in high tax states are being seriously hurt and when many of these high-end individuals move, it has a ripple effect on the economies of that state.

If you remember, part of the new law capped how much homeowners can subtract from their federal taxes for the payment of local property and income taxes. The cap is set at $10,000 which, in states like New York, New Jersey and Illinois to name a few, is far below what most homeowners pay in property tax and state tax combined.

The average property tax in the United States in 2018 was about $3,500 according to a national data real estate firm. However, this is far below what much of the northeastern states pay in property tax. In Westchester County in New York State, the average property tax was more than $17,000, the highest in the country. In addition, the law also lowered the size of mortgages for which new buyers can deduct the interest to $750,000 from $1 million, just adding to the high tax and high property value states’ misery.

Not everyone is moving because of taxes exclusively, some were considering a move already and many were near retirement and just needed a little push. Whatever the reason, Florida is one of the beneficiaries of the movement with increased sales and rising property values.

These are the January sales statistics for Manatee County from the Realtor Association of Sarasota and Manatee: Single-family homes closed 22.4% more homes in January compared to last January. The median sale price was $329,500, an increase of 6.6%, and the average sale price was $420,775, an increase of 8.7%. Condos closed 47.7% more properties this January compared to last year. The median sale price was $210,000, up 7.7%, and the average sale price was $236,687, down 1.8%.

An ongoing problem continues to be a lack of inventory, with 3.4 month’s supply for single-family properties and 4.7 month’s supply for condos. These numbers are either down double digits from last year or even. As the Realtor Association of Sarasota and Manatee headline reads in its press release “Home Sales Out-Pace Supply.” Not a great place to be.

For those who want to change your address to one in Florida, make sure you establish a legitimate residency. States are known to conduct residency audits to verify you’re really leaving their state. This happens a lot when people own two homes in different states and want to move their residency. Florida wants you to get a driver’s license, obtain Florida license plates and auto insurance, file a declaration of domicile, apply for Florida homestead exemption, register to vote and open a bank account. Floridians should get ready for this influx to continue.

As with most changes, there’s always a good and a bad aspect and we’re sure to experience both.

More Castles in the Sand:

The greying of the mortgage market

Credit scores have new meaning

Let’s all just take a breath