Mackay, Caswell & Callahan, P.C.
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What are the Tax Implications of President Trump’s Florida Relocation?

Relocating in order to achieve better tax treatment is nothing new, but President Trump’s recent move could reignite interest in this practice throughout the country. In this post, we will address what accountants and tax professionals should know about Trump’s move.

Jan 7th 2020
Mackay, Caswell & Callahan, P.C.
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As many know, President Trump owns a piece of real estate – the Mar-a-Lago Club in Palm Beach, FL – and claims that this will serve as his “permanent residence” for domiciliary purposes. Trump has many other properties, but the Mar-a-Lago will now function as his main residence for state residency.

Trump’s relocation is interesting for many reasons, but what sort of lessons or messages should accountants and other tax professionals take away from this development? 

Trump May Improve His Tax Situation

The primary motive underlying Trump’s decision is better tax treatment. This was even acknowledged by Governor Cuomo in his tweet regarding Trump’s relocation.

Trump claims that he has previously paid millions of dollars in state and local taxes to the State of New York. Trump may indeed achieve more favorable tax treatment by relocating to Florida, but without an examination of his tax returns there is actually no way to determine whether this is the case conclusively. 

Currently, the State of New York has a top state income tax rate of almost 9 percent, and the City of New York has a top local income tax rate of almost 4 percdnt. Florida currently does not have a statewide income tax, and so it’s possible that Trump may save considerable amounts at the state level by moving to Florida. What’s more, if Trump decides to remain in Florida permanently, he may benefit from Florida’s relatively gentle top estate tax rate of 16 percent, which applies to estates over $10.1 million. 

Promoting Relocation May Be Beneficial in Some Cases

Although many have lashed out at Trump for his move, it’s important to remember that this type of relocation is a form of legitimate tax avoidance, and legitimate tax avoidance is not only permitted but smiled upon by courts. All Americans, including the President, have the legal right to minimize their tax burden.

In a way, Trump’s behavior in this regard could be seen as an encouraging example. One thing accountants should take away here is that promoting relocation as a tax minimization strategy can be a very effective piece of advice.

Suppose you have a client who owns two properties, one located in a high income tax state (i.e. California) and another in a state with zero state income tax (i.e. Washington State). In this situation, depending on a client’s specific circumstances, promoting relocation may be very good counsel.

A client could conceivably save a good chuck of money by simply relocating from one state to another. And, in some cases, this may not even require a very dramatic change of lifestyle, depending on the particular domicile requirements involved. And this bring us to the final point.

Familiarize Yourself with Domicile Requirements 

If you’re an accountant in Washington State, a good practice would be to familiarize yourself with the domicile requirements of neighboring states. If you have clients who own multiple properties in different states, they’re likely to own them in neighboring states.

Washington State accountants can improve their practice by learning the domicile requirements of Idaho, Oregon and California, for instance. Being able to counsel clients on relocation requirements may end leading to significant savings and, consequently, increased client retention and credibility.

If Trump doesn’t follow the rules correctly, he could end up failing to attain Florida residency status and remaining a resident of New York. This is exactly why specialists are needed. If you study the domicile requirements which affect your clients, you can create significant value and build a larger client base. 

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