Retirement
With 1800 miles of coastline, six major cities and approximately 18 million residents, Florida is a very diverse state. Florida is where many people instinctively look for a retirement community – it probably has more top retirement communities of anywhere in the world. Its climate is warm all year round and you are never too far from water. Living costs can vary a great deal within the state – inland and northern towns tend to have more inexpensive options, while high-end communities like Naples have real estate prices and a cost of living that are significantly higher. Recreational activities are exceptional in this state with a double coastline on the Gulf of Mexico and Atlantic Ocean.
COSTS OF LIVING IN FLORIDA
Overall, the cost of living in Florida is lower than many locations in the US. Some things cost more, some cost less. Here are a few specifics.
Real Estate Prices: High affordability with the real estate melt-down. Properties can now be purchased for up to 60% less than 4 years ago. There are many excellent buying opportunities throughout the state.
Property Taxes: With the declining real estate value, assessments are being adjusted and taxes are being reduced in accordance to current market values. Florida also has a Homestead exemption that helps reduce the tax on your principal residence.
Rental Rates: Many baby boomers have purchased homes in anticipation of retirement, but until that day arrives, the properties have been placed on the rental market. This creates an excellent opportunity to increase equity in anticipation of a mortgage free retirement in the future. Seasonal rentals are always in demand and there are significant tax incentives to take advantage of while the property is an investment.
Insurance Rates: Not bad overall, but the hurricane season of 2004 is causing virtually all homeowners insurance companies to raise their rates and decline to renew many policies, especially those covering mobile homes. Auto insurance is still a bargain.
Food and Drug Taxes: No tax on either food or drugs, with the exception of prepared foods.
Medical Care: The costs of medical care are about average. With such an overwhelmingly senior population, there is an abundance of doctors, dentists, clinics, and hospitals. Once you arrive, start shopping for new medical services as soon as possible.
A NOTE ON ESTATE TAXES
When one dies the value of their estate is subject to an Federal Estate Tax. This rate is currently 45%. In 2009 the Federal government has an exemption of the estate tax on the first $3.5 million dollars in value. In addition, many states have additional state taxes that are due when a resident of their state dies. Florida use to have an estate tax, but repealed it when the federal government stopped allowing you to deduct the amount of state estate tax paid from the federal estate tax due. You should check on the estate tax in your state and consider costs and benefits of your state versus those with no estate tax. One of the reasons so many wealthy people move to Florida is the lack of income tax and estate tax.
How much are estate taxes?
Estate tax is computed by figuring the value of the gross estate, which is the value of all assets of the deceased. From the gross estate some items are deducted; most notably for the home jointly owned and occupied by a surviving spouse, which is part of the marital deduction, is excluded from the gross estate. The tax due on this amount is calculated and then a credit is applied. Your estate will have to pay estate taxes if its net value when you die is more than the “exempt” amount set by Congress at that time. Here is the current schedule for the federal estate taxes:
Year of Death………Estate Tax “Exemption”
2008…………………………..$2 million
2009…………………………..$3.5 million
2010…………………………..N/A (repealed)
2011 and thereafter……….$1 million
Under the current tax structure, only 2% – 3% of estates actually pay estate tax and the federal estate tax is eliminated in 2010. However, the legislation repealing it expires in 2011. Unless Congress acts to extend the repeal, the estate tax returns in 2011. Estate taxes and inheritance taxes are not the same. Estate taxes are paid before distribution to the heir, and inheritance taxes are paid by the heir after they receive the assets. If one of the home owners is a resident alien, there is a serious potential tax issue. When the property passes from a US citizen to a surviving spouse who is a resident alien, no marital deduction is allowed. Two ways to manage the situation are through gifting or establishment of a trust.
Use a Canadian corporation to hold U.S. investment properties!
If a Canadian corporation holds the U.S. property, there should not be a disposition of the property for estate tax purposes on death. However, it should be noted that you may pay more combined Canadian and U.S. income tax on investment income and on the eventual capital gain by using a corporation.
