By Andrea McKinney – Vice President & Wealth Management Advisor
I recently had a client ask the following question . . . Since we spend our winters in Florida, what steps do I have to take to change my residency, so I can stop paying income taxes in my home state?
If this is your situation, it can be a complicated problem, with some angles that you may have overlooked. In short, before you make any kind of a change in residency like this, you should see a tax attorney before taking the step of formally changing your state of residency.
For instance, say you change your residency to become a Florida resident. About five years later, you decide to sell your home located in the state you moved from. If you are expecting to sell that home for a gain, then the windfall you are expecting may be taxable.
Here’s why. The sale of your home will not be eligible for the exclusion from taxes on the capital gain for the sale of a principal residence (up to $500,000 for married couples). So, your entire gain or profit will be taxable.
Before you make any type of change to your residency status, please see your tax professional, or talk to us. As a Central Trust Company client, we will help you navigate potential pitfalls like this one. For more information on this topic and others, please visit our website at Central Trust dot net.