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South Florida, with its sunny, temperate climate, continues to attract New Yorkers looking for a new place to call home, one where they won’t have to deal with bitter winters. And there’s more than just the weather to recommend the region. Florida has no personal income tax—a boon to those tired of paying New York’s high taxes—especially now that there’s a tighter cap on state and local tax deductions.
New Yorkers making tracks south are in good company. Florida is reeling in new residents—and their wealth—while states like New York, New Jersey, and Connecticut experience a net loss. In fact, Florida came out on top, attracting $17.2 billion more than it lost—the recipient of a “wealth exodus” from many states, including New York, which contributed about $8 billion to Florida’s income base, according to Bloomberg.
“For our New York clients, many from New York’s wealthiest counties like Manhattan, Westchester, and Nassau, South Florida and especially Miami checks all the boxes,” says Anthony Guerriero of Manhattan Miami Real Estate, a New York and Florida-based real estate brokerage that helps New Yorkers purchase primary or secondary residences in South Florida. “Our clients are drawn to the lifestyle and weather, the cost of living, their real estate purchasing power and, for those who make Florida their primary residence, the incredible tax savings.”
And that was before the coronavirus pandemic hit.
“Covid-19 has broken the glass ceiling on telecommuting, which is likely to remain a bigger fixture of working life even after the epidemic eases,” says Guerriero, who is also a CPA. “Our agents are seeing an uptick in interest among New Yorkers who expect their jobs to remain highly mobile, enabling them to spend much more time at a primary or secondary home in Florida than they would have been able to in the past. Many are looking for single-family ‘safe’ homes and outdoor-centric lifestyles.”
Already, mail-forwarding requests reveal that during the pandemic, a good number of Manhattanites have fled New York City for sunny Miami, The New York Times reports.
Below are the eight biggest reasons New Yorkers are moving to Florida.
1. Florida residents don’t pay state and city personal income taxes
A resident of Florida doesn’t pay state income taxes. Instead, Florida’s income is generated from sales tax and excise taxes. Living in New York City, however, can add 13 percent to your tax bill for state and city taxes. For New Yorkers earning $1,000,000 per year, that's savings of $130,000 per year.
2. New tax law favors low tax states
Florida has always been a bargain when it came to taxes, but now it’s even cheaper relative to other high tax states negatively affected by the Tax Cuts and Jobs Act (TCJA). Prior tax law allowed for the deduction of state income tax and municipal taxes (such as property taxes on a primary residence) for the purpose of federal tax.
Almost overnight, the new tax law made it very expensive to own a primary home in New York. Under the new tax law, the amount of state and local taxes (SALT) deductible for federal tax purposes was limited to $10,000. For a New Yorker who earns $1,000,000 per year and who owns a condo with property taxes of $2,000 per month, not only does this New Yorker lose the deduction of $130,000 of state income taxes, but also $24,000 deduction of property taxes, save for the $10,000 allowable deduction under the law. In this scenario, a $144,000 deduction was lost as a result of the tax change.
Of course, not everyone earns $1,000,000 per year, but for nearly half of Manhattan’s tax payers that have taken the SALT deductions in the past, the average deduction has been over $60,000.
The TJCA also reduced the deductibility of mortgage interest on primary homes from $1 million to $750,000 for federal tax purposes. This is effective only for new mortgages. This change also makes it more expensive to own a primary home across the country assuming one can purchase a $1 million home. In Manhattan, you would be lucky to buy a one-bedroom apartment for $1 million but, in Downtown Miami, you can find a great three-bedroom apartment in a luxury building.
3. Cost of living in Miami is half that of New York City
Another reason to make your home in Miami is the cost of living. According to BestPlaces.net, Miami costs over 50 percent less than New York City. The breakdown by category is below:
|Cost of Living Index||New York vs. Miami|
Overall Index: Homeowner, no child care, taxes not considered
|52 percent more|
|Food and groceries||8 percent more|
|Housing||106 percent more (more than double)|
|Utilities||58 percent more|
|Transportation||25 percent more|
|Health||14 percent more|
|Miscellaneous||16 percent more|
Of course, real estate prices are a wildcard in the equation, as both New York and Miami have a range of pricing, especially for luxury properties. In Downtown Miami, such as Edgewater and Brickell, prices can be quite reasonable for condos in new buildings with great views of Biscayne Bay. Those in Miami Beach, however, can be in the same league as New York in terms of prices, particularly for the best oceanfront properties.
4) No capital gains tax in Florida
Florida does not have an income tax for state residents and, therefore, has no capital gains tax for individuals. In contrast, New York City and State taxes capital gains at ordinary income rates, much like most other states.
That said, while it may seem simple to change residency from New York to Florida, New York State tax authorities don’t make it easy to leave. Under New York tax law, an individual that establishes a domicile outside of New York will still be deemed a “statutory resident” of New York if he or she (a) maintains a “permanent place of abode” in New York for substantially all of the taxable year and (b) spends more than 183 days in New York during the taxable year.
“It’s not like you can simply register to vote in Florida or get a Florida driver license and become a permanent resident of the Sunshine State,” says Manhattan Miami’s Guerriero. “New York State audits just about everyone who changes their residence to Florida. But, for those who are serious about making their home in Florida, the payoff is huge.”
To see how far your real estate dollar will stretch in Florida, explore Manhattan Miami's real estate database to search for a luxury home or condo in South Florida.
5) No estate tax in Florida
Florida has no estate tax of its own, meaning assets are only subject to the federal tax. An estate tax, also sometimes called the “death tax," is a tax on property (cash, real estate, stock, or other assets) transferred from a deceased person to his or her heirs. The federal estate tax code allows for the exemption of $5.85 million for U.S. citizens and primary residents.
In contrast, New York City and State have an estate tax. When a resident dies, the property located in the city and state is subject to city and state estate taxes. Estate tax rates in New York range from 3 percent to 16 percent. Both the city and state, however, mirror the federal rules and exclude the first $5.85 million for U.S. citizens and primary residents.
6) Easier bankruptcy laws than many other states.
Florida has a homestead exemption that allows a primary residence of unlimited value to be protected from creditors, as long as the debtor has lived in Florida for 40 months. This differs greatly from many other states.
While bankruptcy law is not likely a key reason people are moving from NYC to Miami, making Florida your permanent home could be a good option for someone who is at risk of a lawsuit that could potentially put them into bankruptcy (if they lose the suit).
7) Miami's rapid growth
Miami has recently become a global city, one of the fastest growing major cities in the U.S., with easy access to North America, Latin America, Europe, and the rest of the world via the enormous Miami Airport. According to CityLabs, from 2012 to 2017, Miami had the fastest growing job market, increasing 24.1 percent over 5 years. The same study reported that Miami’s population grew by 12 percent, fourth in the nation, during the same five-year period.
Anyone who has been to Miami and Miami Beach in the last five years has seen first hand the rapid pace of growth. Downtown Miami, in particular, has shown hyper growth. According to the U.S. Census, at the end of 2018, Downtown Miami had 92,000 residents up from 40,000 residents in 2000, more than doubling over eight years.
Today, population growth continues. According to the Miami Downtown Development Authority, Downtown Miami will continue its ascent, topping 110,000 residents by the end of 2021, a remarkable compound growth rate of 6 percent per year!
8) Lifestyle and weather
Miami’s lifestyle is hard to beat. Moving to Miami from NYC can add another dimension to one’s life not found in New York, given year-round warm weather. This leads everyone to have a more active outdoor lifestyle whether you enjoy the year round beaches, water sports on Biscayne Bay, running, tennis, golf, and even just walking.
Hand in hand with population growth, Miami has grown up culturally since the party days of the 1990s. Now the city has many cultural offerings, with much centered around the arts.
Over the last 10 years, Miami has seen the addition of the Adrienne Arsht Performing Art Center, Perez Art Museum, and Frost Museum of Science. The Design District neighborhood has exploded with high-end fashion labels and Wynwood Walls attracts a hipster crowd, with its many outdoor art installations, restaurants, and bars. Finally, Art Basel has put Miami on the map, attracting some of the wealthiest people on earth during the first week in December every year.
Manhattan Miami Real Estate is a full-service brokerage that helps people looking to buy, sell, or rent residential property in the New York and Miami metropolitan markets. Click here to instantly schedule an exploratory chat with one of our experts.