USA – FLORIDA Law and Practice Contributed by: Jennifer Jordan McCall, Drew Reitz, Christine Tsai and Maria Williams, Pillsbury Winthrop Shaw Pittman LLP
1.4 Pre-Immigration and Exit Planning Both pre-immigration planning and expatriation or “exit” planning can present meaningful opportunities to mitigate US tax exposure for individuals and fami - lies. Although Florida does not impose a state income tax, individuals becoming a US tax resident or ceas - ing US residency remain subject to complex federal income, gift, estate, and information reporting regimes that often require careful advance planning. For individuals planning to immigrate to the US, pro - active structuring prior to establishing US tax residen - cy is often critical. Once an individual becomes a US tax resident, the individual generally becomes subject to US taxation on worldwide income and assets. As a result, there may be opportunities before immigration to minimise future US income exposure. Similarly, individuals contemplating relinquishing US citizenship or long-term lawful permanent residency should carefully consider expatriation or exit planning strategies before terminating residency status. Cer - tain individuals may become subject to the federal expatriation tax regime, commonly known as the “exit tax,” prior to expatriation. Advance planning before expatriation, depending on the individual’s facts and objectives, may help reduce exposure to the exit tax. Ultimately, both pre-immigration and exit planning are highly individualised exercises. The nuances of these situations are very factual and require navigating US trusts and taxation laws, as well as applicable laws in the foreign jurisdiction and any existing treaties between the two jurisdictions which may influence the advice given. Such clients should seek counsel to advise them on the various aspects of these plan - ning objectives. 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens The US tax laws may be dependent upon whichever political party controls the US House of Representa - tives, the US Senate, and the Presidency. The two major US political parties have very different view - points on the topic of taxation, both from an income tax perspective and a transfer tax perspective. For example, the “One Big Beautiful Bill” extended and made permanent many of the 2017 Tax Cuts and Jobs
On the state level, Florida imposes property taxes on the ownership of real property (as discussed in 1.2 Exemptions ). However, there are various property tax exemptions, with the most notable being the Florida homestead exemption. To qualify for homestead exemption, a person must, on 1 January of the year, have “legal title or beneficial title in equity to real property” in Florida and must “in good faith make the property his or her permanent residence or the permanent residence of another or others legally or naturally dependent upon him or her”. A permanent residence is the place “where a person has his or her true, fixed, and permanent home and principal establishment to which, whenever absent, he or she has the intention of returning”. A person may have only one permanent residence at a time. If the homestead exemption applies, the assessed value of the real property can be reduced by up to USD50,000 for property tax purposes (with certain adjustments to inflation). Additionally, under the “Save Our Homes Act,” the assessed value of the home - stead property cannot be increased by more than 3% above the last year’s assessed value (or the consumer price index, whichever is lower). Moreover, Florida’s Constitution allows for certain creditor protections for homestead properties within a certain acreage. 1.3 Income Tax Planning Many tax planning opportunities exist for Florida residents. Florida is a favourable state for income and estate tax planning, as it does not impose state income taxes, state estate taxes, or state estate tax - es. Nor are there state inheritance taxes if an indi - vidual inherits property from someone else. It also has strong real property exemptions and protections for a person’s permanent residence, as long as certain requirements are met (as described in 1.2 Exemp- tions ). Non-residents of Florida may also benefit from Florida’s favourable income tax regime, combined with its Rule Against Perpetuities law, allowing trusts governed by Florida law to last for up to 1,000 years. However, various requirements of Florida law, such as the requirement of annual accountings and mandatory disclosure of trusts to beneficiaries, may offset these benefits – see 2.6 Transfer of Assets: Vehicle and Planning Mechanisms.
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