After nearly four decades working in New York City, Scott Scovel was ready for something new. In 2019, he sold his Manhattan condo for $1.65 million, and in 2021, he took a job in Miami.. He was hoping to benefit from Florida’s lack of income tax and relatively lower cost of living.
The tax savings, it turned out, didn’t impact him as much as he’d expected. While working, he says he saved around $40,000 a year. But the real advantage was how much further his housing budget stretched.
He spent $727,500 on a two-bedroom condo in Miami, which left him with just under a million from the sale of his NYC residence — and that cushion allowed him to retire much earlier.
“I suddenly realized I could afford to retire years earlier than I expected,” Scovel told Business Insider (1). “For that, I’m extremely grateful to Miami.”
His story raises an interesting question: If you have a significant amount of home equity, could a similar move work for you?
Florida has no personal state income tax (2), which can be a huge advantage for high earners. Scovel estimated that when living in New York, state and city taxes cost him close to $40,000 in some years. Moving to Florida wiped that out entirely.
But that benefit has a shelf life. Once Scovel retired and stopped drawing a salary, the income tax advantage no longer mattered, since Florida doesn’t tax investment income (3) or Social Security. But New York also doesn’t tax Social Security benefits (4), though it does tax investments (5).
What about everyday costs? Scovel found them roughly similar. Groceries were modestly cheaper, but transportation was actually pricier in Miami, since he needed a car (or costly rideshares) rather than the subway in New York. Many purchases he made online, like clothing and household goods, didn’t change in price at all.
There’s also the cost of property taxes to consider. Florida only charges .8% in property taxes (6), but Miami has property taxes, too, which tacks on another 2% (7). Scovel could expect to pay around $14,000 a year in property taxes based on the state’s tax estimator. Of course, New York’s property taxes are quite high — as much as 20% (8) compared to Florida’s.
There’s also homeowners’ insurance to consider. Florida’s rates are notoriously high — a policy for a $300,000 home runs around $5,800, which is more than $3,000 higher than the national average. The same policy on a similar house in New York costs an estimated $1,800 (9).
The lesson here is that if you’re counting on a relocation to dramatically slash your monthly expenses, do the math carefully before you move. The day-to-day savings may be smaller than you think.
Read More: 5 essential money moves to make once you’ve saved $50,000
The real benefit for Scovel wasn’t tax policy — it was the massive amount of home equity from his NYC sale and the relatively cheaper housing market in Florida. The concept is pretty simple: Sell a high-value property in an expensive market and buy a similar one for cheaper elsewhere.
If you’re considering a comparable move, here are a few things to keep in mind:
This strategy only works if you’re sitting on a significant amount of equity and can buy and move to a cheaper area. Run the numbers on both sides — and make sure to consider things like homeowners’ insurance and property taxes.
The IRS excludes up to $250,000 (10) in home-sale gains from capital gains taxes ($500,000 for married couples filing jointly) if you’ve lived in the residence for at least 2 of the last 5 years. Anything above that figure is taxed, and if your home has dramatically increased in value, the tax bill could be high.
Scovel arrived in 2021, just after the pandemic. Median home sales have risen since then, though prices are cooling this year (11). Still, math that worked just a few years ago might not be as financially prudent today.
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Business Insider (1); State of Florida (2); Smart Asset (3); Fidelity (4, 10); Edelman Financial Engines (5); Tax Foundation (6); Tomas Regalado (7); NYC Department of Finance (8; Bankrate (9); Redfin (11)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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