If you’re thinking about moving to Florida for financial reasons, it’s probably a bad idea. Here’s why.
The tax difference isn’t that much.
Florida not having an income tax is usually overrated. That’s because people don’t think about how much they’re paying in state taxes or about other taxes.
For example, while California income taxes top 12% for high earners, their tax brackets start at just 1%. In fact, most people around the country probably only pay 1% to 5% in state taxes.
And if you’re paying less than $10,000 per year in state income taxes and property taxes, you can deduct your state income taxes and property taxes in full.
So let’s say that you pay $5,000 per year in state taxes. Moving to Florida does not save you $5,000.
You might be saving $1,000 in federal taxes from the state and local tax deduction. That knocks your potential savings down to $4,000.
Did you know that in most places in Florida, you’ll pay a 7% or 8% tax sales tax on almost everything except groceries? That could cost you another $500 to $1,000 or more.
And when you see that Florida is right in the middle of states when it comes to average property taxes, there’s a very big catch to that. Florida has very aggressive homestead protections that limit property tax increases. If you’re buying from a long-time homeowner, especially in an inflated market, your property taxes might be triple what he was paying or even more.
Another thing you can look at is Tax Foundation’s tax burden by state. They looked at how much of your income goes to all types of taxes. Florida looks pretty good at #11, but there’s only a 1% to 3% difference between Florida and most other states.
That difference goes away once you start to look at other factors.
Florida jobs pay poorly.
Florida ranks #34 out of 50 states in median income. Unlike the tax rankings, the differences in income are much greater.
You only need to go up a few spots to see a 10% increase, and the top states are nearly double Florida.
Remember, most of Florida’s economy is in tourism jobs that pay relatively poorly. Trade jobs also have relatively lower pay because that’s what homeowners can afford.
There also aren’t many office jobs in Florida outside of employers that need to be in the region. Most employers don’t want to deal with hurricane disruptions.
In short, don’t move to Florida if you don’t already have a job lined up.
If you’re a remote worker, you also need to think about your next steps. Many employers will use the recession to reduce remote work. Some employers have already started reducing pay for employees that moved to lower-cost-of-living states.
So if you move to Florida and either lose your job or need to change jobs to advance, you may need to leave Florida to find a better job.
Florida rents are crazy high.
Florida rents are fast rising to some of the highest in the nation.
Miami is #5 at $2,670 for a 1 bedroom ahead of even Los Angeles. Close behind are Fort Lauderdale (#13), Orlando (#26), Tampa (#28), and Saint Petersburg (#31).
This includes a 28% increase from 2021 to 2022 alone. It’s due to a combination of remote workers flooding the state and houses getting bought up as tourist rentals.
Florida home prices are also insane.
Florida home prices have also gone insane jumping from a median of about $200,000 in 2020 to over $400,000 at the end of 2023.
Most of the jump isn’t from new construction but because of a lack of construction. Many of the homes on the market are older and need major overhauls.
And because Florida home prices were so low for so long, most homes built in the last 30 to 40 years were wood frames built to the minimum building codes. So even if a home seems newer compared to the average home ages where you’re moving from, there’s still a good chance it will need major work.
Florida’s insurance market is collapsing.
Florida easily has the most expensive car insurance rates in the country topping an average of $3,000 annually for full coverage. That’s a full $1,000 more per year than most major cities. It’s also double or triple many lower cost of living areas.
The two biggest causes are the thousands of cars destroyed in hurricanes as well as about 1 in 4 drivers being uninsured raising rates for everyone else.
Florida also has some of the highest home insurance rates in the nation, although several states in tornado alley are higher. But the even bigger problem is that insurance companies are simply leaving.
Florida law often requires a full roof replacement regardless of age for any damage. So basically, if you have a 20-year-old roof that was already due for replacement and a hurricane blows some shingles off, your insurance company might have to pay for your new roof.
In addition to actual damage, many roofing companies have been encouraging homeowners to submit false claims to get a free roof. Insurance companies simply can’t afford to do business.
The insurance companies that are left are skyrocketing their premiums while adding strict requirements like forcing homeowners to replace their roofs well before the end of their useful lifespan.
So on top of higher insurance rates, you also need to budget an extra $1,000 to $2,000 per year to replace your roof sooner.
Florida has no public services.
Another hidden cost of living in Florida is the fact that it has almost no public services covered by taxes.
One of your first experiences when moving to Florida will be the very high fees to transfer your driver’s license and car registration.
Florida has no public transportation, so you’ll need to buy and maintain a car even if you rarely drive.
Free entertainment is also non-existent. Nearly every public park charges a parking or entrance fee. Most other parks are exclusively rented to sports leagues and locked up the rest of the time.
In addition, most highways other than the federal interstates are toll roads, and there’s almost no way to avoid them.
Conclusion
Florida not having an income tax doesn’t mean it has a lower cost of living. Other taxes and expenses often cost well more than any tax savings.
Don’t move to Florida unless you already have a job and have carefully done the math.
