South Florida is the Better Tax Haven—for Commercial and Residential Property
High net worth individuals (HNIs) love Miami. They’re coming en masse to South Florida to buy up real estate with plans to become residents. Why? To avoid ultra high state and city taxes.
The buyers including finance and banking professionals, hedge fund administrators, real estate moguls, business entrepreneurs and CEOs from states as diverse as New York, New Jersey, California and Illinois. The common thread is state income taxes as high as 13%, and even city taxes like those in New York City. So Florida, with no state income tax, is seen as an in-country tax haven. These HNIs are basically “tax refugees”. Importantly, they are a large percentage of the buyers of high-end listings.
Barry Sternlicht, CEO of Starwood Capital Group is at the forefront of this movement. He personally moved here and then relocated his company here from Connecticut, stating “My generation, which is the tail end of baby boomers, are coming. We’re changing our addresses and we’re coming to low-tax states.”Most states levy income taxes. For wealthy individuals, those state taxes can be as high as California’s 13.3%.
But moving residency requires living in your new state for a high percentage of the year, getting a state driver’s license and personal documentation, and establishing legal and financial footprints. And with Florida’s property taxes so low, many are coming to South Florida in droves. Of the other states without an income tax (Alaska, Nevada, South Dakota, Texas, Washington and Wyoming), Florida is often seen as the most preferred destination.
And currently the high-end inventory is high so sellers are cutting prices to attract buyers. And the general cost of living is often a big step down from the cost in some of the higher-tax states. Ask anyone who lives in NYC or California and you’ll quickly understand.
To help motivate buyers, especially on new construction, there are often sweeteners—finishing touches for buyers such as free flooring, free memberships, and pre-designed furniture sets.
South Florida is well-known for lifestyle (including amazing weather and a sunshine state of mind), but adding tax value to that makes Florida one of the most attractive locations in the country for wealthy individuals. As they move to the state they buy homes. But they also buy and rent commercial property, start businesses that create jobs, sometimes even open industries to the state. This wealth is a windfall for the state, as well as the community.
Have you felt the migration of wealth to South Florida?