Establishing Florida Residency for Tax and Other Purposes

Question:  I will be spending the winter months in my recently-purchased Florida home and residing the balance of the year in my Illinois residence. Can I claim Florida as my State of residence for tax and other purposes?

Answer:  The State of Florida is no doubt an attractive venue for tax purposes. Unlike most states, Florida does not impose an income tax. Florida, unlike Illinois, does not have a State estate tax. Aside from these favorable tax benefits, many individuals seek residency in the State of Florida where they enjoy enhanced protection from creditors due to the generous homestead exemption the state allows.

While claiming residence in a state can usually be readily accomplished, caution must be exercised in renouncing residency in a state where an individual continues to reside, even on a part-year basis. The State of Illinois does not have a bright line test for determining whether or not an individual is an Illinois resident. Illinois presumes residency for any individual who spends more than nine months of any taxable year within the state. Although this presumption can be overcome, you will be well advised to spend more than three months of each year in the State of Florida as simply avoiding the presumption of Illinois residency will not in most cases be sufficient to establish you are no longer an Illinois resident. Rather, you should plan on spending more than one-half of your time of each year residing in the State of Florida.

Time, of course, is only one factor that the State of Illinois considers in determining whether or not an individual is eligible to be treated as a non-resident. The Illinois Administrative Code reflects many factors which must be considered in determining Illinois residency such as where an individual maintains voter registration, where automobile and driver’s license registrations are maintained, the state an individual lists as a residence for income tax purposes, the individual’s club and other memberships and other factors. In addition to complying with the Illinois Administrative Code, some of the other steps you should take to support your position that you are a Florida resident include the following:

 Reflect the address of your Florida residence as your address for personal and financial purposes;

  1. Cease claiming a homeowner’s exemption for your Illinois residence;
  2. Have all of your mail sent to your Florida address;
  3. Modify your Will and Trust documents to reflect your Florida residency and conform the documents to Florida law;
  4. Claim a Florida homestead exemption for your Florida residence;
  5. Maintain your valuable papers in a safety deposit box at a Florida bank rather than at an Illinois bank;
  6. Establish medical, dental and other professional relationships with Florida practitioners;
  7. Change your passport to reflect your Florida address;
  8. Change your religious and other affiliations to Florida churches, synagogues or other institutions in the State of Florida.

Bear in mind that successfully claiming Florida residency will not necessarily eliminate all Illinois income or estate taxes. If you individually own real estate in the State of Illinois, for example, any income from these properties will be taxable in Illinois and the value of these properties will be subject to Illinois estate taxes at the time of your demise if you have a taxable estate. With some exceptions that likely will not apply in your case, you will also be subject to Illinois income taxes on earnings from employment within the State of Illinois, regardless of your State of residence.

The absence of a bright line test means that careful planning is required to establish Florida residency. The more steps you can take to eliminate ties to Illinois, the more supportable your position that you are a resident of the State of Florida.

 

The Tax Corner addresses various tax, estate, asset protection and other business matters. Should you have any questions regarding the subject matter or if you have questions you want to be answered, you may contact Bruce at (312) 648-2300 or send an e-mail to bruce.bell@sfnr.com.