Florida is one of the most popular retirement destinations nationwide, but it can also be quite pricy to live here. Apart from cost of living, one of the most significant expenses in any state is taxes, income tax being the most influential. Since retirees usually have to rely on a fixed income, being subjected to income tax can be a huge financial burden. The question is, do retirees in Florida have to be concerned about income taxes, and if so, how much is it?
There is no state income or retirement income tax in Florida. Additionally, there are no state taxes on:• Pension income• Income from an IRA or 410K• Social security• Inheritance or estates
These are just some of the many benefits that make Florida an uncommonly tax-friendly state.
In this article, we’ll discuss everything you’ll need to know about Florida’s taxes and benefits as a retiree. This will allow you to take full advantage of these resources so you can save money and make Florida the ideal retirement location for your golden years.
What Are Taxes Like in Florida?
No matter where you live, taxes are an unavoidable evil that can take many forms. The most common tax people pay is an income, which typically taxes 1-10% of the money you earn, but this and the many other types of taxes tends to vary significantly based on the state you live in.
Florida is considered a low-tax state, largely because it is one of nine states in the entire country that does not have incomeor retirement income tax. This is undoubtedly the tax that affects citizens most, and so, Florida retirees can save a substantial amount of money from this alone.
But the perks don’t stop there. In addition to 0% state income tax, Florida does not tax pension income or income from the IRA, a 401K, or Social Security. There is also no inheritance or estate taxes in this state.
At first glance, this might seem too good to be true, but we guarantee that if you decide to retire in Florida, you won’t have to pay the state a penny for any of these common taxable sources of income.
However, because states rely heavily on taxes to maintain infrastructures, fund social programs, and other essential public services, they can’t simply be tax-free places to live. So, if all ofthe aforementioned taxes don’t exist in Florida, how does that affect other types of taxes (ex. sales, property, excise)
Sales Taxes In Florida
Essentially, a sales tax is a tax placed on the sale of commongoods, such as retail items like groceries and clothing, and services, like mechanic services or hairdressing. It’s important for any retiree to know the sales tax rate in their region since itcan significantly increase their cost of living if they consistentlypurchase essentials in a county with higher sales taxes.
Estimating sales taxes can be a little tricky since this is something done on both the state and local levels, but overall, sales taxes are relatively reasonable in Florida.
Here, the average local sales tax rate is 1.05%, with a state sales tax rate of 6%. Combined, you have an average state and local sales rate of 7.05%, which is slightly higher than the national average of 6.35%.
An overarching reason why the sales taxes in Florida are higher than the national average is because the state has no income tax. Therefore, in order to still obtain money from citizens for funding, other taxes, such as this, are increased. You’ll find this is a relatively common trend with other taxes in Florida.
Property Taxes in Florida
All states have property taxes, and this is another tax, aside from income tax, that can play a big role in a retiree’s annual income. According to the U.S. Census Bureau, the average Americanhousehold pays $2,471 per year in property taxes at an average real estate tax rate of 1.0%. For a retiree on a fixed income, that’s a hefty sum.
In terms of national ranking, Florida resides relatively in the middle for property taxes with an average real estate tax rate of0.98%, an average home price of $328,576, and an annual property tax of $1,752. If anything, it is the property prices in Florida that retirees need to be concerned about, but these prices have also substantially increased since the COVID-19 outbreak. In 2020, the median single-family home in Florida cost $290,000 which is comparable to the national average of $293,349.
Excise Taxes in Florida
The last tax we’ll discuss in relation to Florida is their excise taxes. These are very similar to sales taxes; however, an excise tax is placed on more specific goods like fuel, tobacco, and alcohol. Additionally, as opposed to a sales tax that the consumer pays directly, an excise tax is paid by the business selling the product.
You might be wondering how a tax paid by businesses affects a Floridian retiree. Well, the higher the excise tax, the higher the product is going to cost. The is one of the reasons why gas might be pricier in one state than another.
In Florida, the gasoline tax rate is 42.29 cents per gallon, placing it relatively high nationally, but nowhere near the top states likeCalifornia with rate of 66.98 cents per gallon. Of course, this is just one example of excise taxes in the state.
Are There Any Tax Exemptions in Florida for Retirees?
Not having to pay a retirement income tax is already a huge weight off of many retirees’ shoulders, but there are ways they can reduce the financial burden of taxes even further by applying for tax exemptions.
Most states in America offer some form of tax exemptionthat citizens can apply for, and Florida is no different. The most widely used tax exemption in this state is the homestead tax exemption, which can decrease the property’s taxable value by as much as $50,000. This would effectively decrease mortgage payments and other expenses associated with the retiree’s home’s value.
In addition to the homestead tax exemption, there are various tax exemptions offered to Florida retirees who are veterans or disabled. There are also number of local tax exemptions retirees can apply for that might reduce their property value or other expenses as long as they can prove they live within a designated county and fulfill all other eligibility requirements. It isn’t uncommon for retirees to have a state-level form of assistance, such as the homestead tax exemption, before they are eligible for the county-level benefits.
So, if you truly have your eyes set on Florida as your retirement destination but you’re unsure if you can handle the cost of living here, look into these resources and any other assistance the region you hope to move to might be offering.
What Are Other Benefits Florida Offers Retirees?
So far, we’ve painted a pretty favorable picture of retiring in Florida, particularly when it comes to taxes. However, there is more to this state’s benefits than that.
Some of the top benefits of retiring in Florida include the state’s:
• Assistance programs
• Cost of living
• Travel ease
If you’re considering retiring in Florida, we strongly encourage you to read on as we discuss each of these benefits and what they entail.
Assistance Programs for seniors in Florida
While Florida is one of the most affordable states to live in when it comes to taxes, it isn’t uncommon for retirees, especially in their senior years (55+) to need extra assistance from the state to help them get by. Even if they’re doing well, there are several assistance programs retirees can utilize to reduce their cost of living and make retirement even more comfortable.
The most widely used and reputable assistance programs in the state of Florida include: • Adult Care Food Program• Community Care For the Elderly (CCE)• Comprehensive Assessment & Review for Long-Term Care Services (CARES)• Elder Farmers Market Nutrition Program.• Emergency Home Energy Assistance Program (EHEAP)• Health & Wellness.• Home Care for the Elderly (HCE)• The Florida Retirement System (FRS) Pension Plan• Florida Mature Driver Program
Many of these programs have prerequisites retirees have to fill in order to be eligible, but some, like the Florida Mature Driver Program, can be utilized by anyone. Unfortunately, if you’re relatively young retiree, you probably won’t find many assistance programs you’re eligible to use, but this might be a good time for you to contribute to the ones you support the most until you can reap their benefits yourself.
Having a supportive community of substantial size can make a world of difference for a retiree moving to a new state,especially if they’re leaving all their friends and family behind in the state they lived previously. So, if you want to retire in a state that is home to a large 55+ community, you’ll want to pack your bags for Florida.
The retiree community you’ll find in Florida is nearly unrivaled nationwide. More than 6.9 million people over the age 50 (comprising 36.9% of the overall population) call this state home, making it a welcoming environment for individuals ready to wind down or explore all of the new adventures that come with retirement.
Because Florida has such a substantial population of retirees, it also has some of the best assisted living facilities and residential communities in the country.
Another benefit is that individuals who retire in Florida often tend to be extremely active. Therefore, it is the perfect place to find like-minded retirees who also enjoy playing sports, going out to social events, trying the state’s finest cuisine at restaurants, and other activities more sedentary retirees would avoid.
Cost of Living
The cost of living is a huge benefit for those looking to retire in Florida. The state’s low taxes and moderate climate mean that retirees can enjoy their golden years without worrying about going broke after the nest egg runs out, as often happens elsewhere.
While some cities have higher costs than others, overall the Sunshine State offers decently low costs for retirees with a cost of living index ranking of 102.8 versus the national average of 100. The most significant contributors to this cost are utilities and groceries, but housing has been steadily increasing the past year.
Still, if you avoid retirees in highly populated cities, beachfront towns, or tourist hotspots, you can expect your cost of living to in Florida to be extremely reasonable, if not below the state and national average.
One of the primary driving points for retirees moving to Florida is the climate. Here, citizens get to experience sub-tropical temperatures year-round, with average settling around 82 degrees Fahrenheit. This makes the state a haven for retirees fleeing from colder states with harsh winters.
Of course, there is a trade off in the sense that Florida is a relatively humid state and trades snowstorms for rainstorms. That being said, the state experiences 237 days a year of sunshine, so your days of worrying about poor weather are far and few between.
The final benefit of moving to Florida that many retirees might not realize is how easily you can travel in-state and internationally from here.
Florida has a number of fantastic attractions that pull tourists for around the world here, especially to its shores. Because of this, the state’s Department of Transportation has dedicated a significant amount of funds and effort to making its transportation systems as accessible and efficient as possible.
In addition to in-state transportation, Florida has 131 public airports, 365 private airports and 24 international airports that makes traveling in the U.S. and internationally a breeze. One airport in particular, the Orlando International Airport (MCO) is actually one of the most affordable airports in the country, which is a huge perk for any retiree interested in traveling as much as possible.
If you’re looking to retire soon and plan to move out of state, you’ve probably already had Florida on your radar, but hopefully learning the amazing tax benefits of this state along with its other advantages has convinced you that this is the optimal location for your retirement. Not only will you save a substantial amount of money living here, but Florida also has a rare retirement-friendly atmosphere you can’t find anywhere else.