If you are an Illinois snowbird looking for tax relief in the Sunshine State while maintaining homes in Illinois and Florida, you may believe that spending 181 days in Florida and 179 days in Illinois lets you off the hook for Illinois taxes (a flat 4.95% tax on income and approximately 16% tax on estates exceeding $4MM), but it’s not that simple. The more ties you retain with Illinois, the more likely that the Illinois Department of Revenue will assert its right to tax you.
Below is a list of 12 steps you may want to take to withstand the Illinois Department of Revenue making a successful claim against you or your estate upon a move to Florida (or some other state with lower taxes than Illinois) while retaining connections to Illinois:
- File a declaration of domicile in the Florida county jurisdiction where you reside.
- Obtain a Florida driver’s license and new passport with your Florida address.
- Register to vote in Florida, and if you are summoned to be on a jury, show up to serve.
- Sell your Illinois residence, and if you own a Florida residence, apply for a homestead exemption. If you need to maintain an Illinois residence, better to rent.
- Maximize your business and financial ties to Florida while minimizing your business and financial ties to Illinois. This would include changing your primary address with all the companies you do business with to Florida. Work with local Florida financial services or the Florida affiliates of national banks and brokerages.
- Hire Florida lawyers to revise your estate planning in accordance with Florida law and declare Florida your legal residence in your will, trust(s) and powers of attorney.
- Register and insure your vehicles and other valuables in Florida.
- Engage the services of Florida doctors, dentists, CPAs and other professionals. Have your
transferred to your Florida professionals.
- Spend most of your time and money in Florida, and at the very least, more than in Illinois.
- If you make funeral arrangements, make them in Florida, and buy your cemetery lot or crypt there.
- If you are still working and need a rofessional or occupational license to do your job, get the Florida licenses and maintain them via Florida educational programs.
- While transitioning to Florida, file a final Illinois income tax return as a part-year resident through the day you assert that you moved from Illinois. After the move from Illinois, file a nonresident income tax return for Illinois income you still receive. Once you receive no more income from Illinois, only then may you stop filing Illinois income tax returns, but be aware that not filing returns results in an indefinite period (basically, forever) for the Illinois Department of Revenue to file a notice of delinquency if it determines that there continues to be Illinois income. Penalties may be added to your tax debt.
The list above is not all-inclusive, but a rule of thumb is that, if you maintain an Illinois presence but wish to be free of Illinois taxes, do as much as you can by consistently demonstrating an intent, in both words and deeds, of making Florida your true domicile.
As a final aside, Matlin Law Group has advised clients who jumped through most or all of the hoops above, just to bounce back to Illinois, usually because this is where their children and grandchildren live. Either they miss the proximity of family or they come back to Illinois for medical reasons, including its outstanding hospitals.
Eric G. Matlin is President of Matlin Law Group, P.C., a Northbrook, IL law firm that concentrates in the legal areas of estate planning and estate administration. Call (847) 770-6600 or visit www.MatlinLawGroup.Com to schedule an estate administration consultation or free initial estate planning consultation.
Eric is the author of two books. Not Dead Yet so plan your estate (2019-available at Amazon.com or directly from Eric, in person), is a serious estate planning handbook with a book-within-a-book full story arc graphic novel that visually demonstrates the kind of nightmares that occur when people do not plan for life’s uncertainties and death’s finality. Eric’s 2004 book is The Procrastinator’s Guide to Wills and Estate Planning, with a new edition on track to be available later this year.
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This article is for informational purposes only and is not intended to be relied upon in the absence of an attorney-client relationship between you and the attorneys of Matlin Law Group, P.C. No attorney/client relationship occurs unless and until you sign an agreement confirming the nature and scope of representation. Always seek advice from a qualified lawyer.