North Carolina vs. Florida: Creditor Protection & Taxes
Many North Carolinians have winter homes in Florida, and even more Floridians have summer homes in the North Carolina mountains. For those who live part-time in each state, there may come a time when they want to think about changing domicile from one state to another. Others may simply be trying to choose between Florida and North Carolina to which to retire or otherwise move. When it comes to offering protection for one’s assets and less taxation, Florida wins hands down over North Carolina. However Florida has high property taxes and homeowners’ insurance rates, and there are many quality of life issues to consider.
For a comparison chart of North Carolina and Florida on Creditor Protection and Taxes, click “Continue Reading.”
CREDITOR EXEMPTIONS (When assets are protected from creditors) |
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NORTH CAROLINA | FLORIDA |
HOMESTEAD EXEMPTIONS N.C. Gen. Stat. § 1C-1601(a) (2009) Real and Personal Property Retirement Accounts 529 college Savings Plans Compensation for Personal Injury Disclaimed [“renounced”] inheritance EXCLUSIONS FROM CREDITOR EXEMPTIONS The aforementioned protections are inapplicable to claims: |
HOMESTEAD EXEMPTIONS Fla. Const. art. X § 4 Real and Personal Property Life Insurance Cash surrender value and annuities Retirement Accounts Medical Savings Accounts and College Savings Plans EXCLUSIONS FROM CREDITOR EXEMPTIONS The aforementioned protections are inapplicable to claims: |
ESTATE TAXES |
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NORTH CAROLINA | FLORIDA |
None in 2010, just as at the federal level, but the estate tax will return in 2011 when the federal one does. a. 2011 Federal exemption will be $1 million with a maximum 55% tax rate for assets exceeding $1M b. If 2009 rates are reinstated in 2011, the NC estate tax rate will be a minimum of 6.4% and a maximum of 16.0% for assets exceeding $1M N.C. Gen. Stat. § 105-32.2(a) (2009) North Carolina imposes an estate tax on the estate of a decedent when a federal estate tax is imposed and the decedent was either a NC resident at death or a nonresident who owned real or tangible personal property located in NC or intangible personal property (e.g., securities) that has a tax situs in NC. |
None. Florida does not impose an estate tax on real property and tangible personal property3. Note: If a FL resident owns real property in another state, then that state’s estate tax exemption laws will apply to that real property. Although there is no federal estate tax in 2010, many individual states still impose an estate tax. Furthermore, even after the Federal estate tax returns in 2011, state estate tax exemption cut-offs may be for greater or smaller amounts than the federal one. |
INCOME TAXES | |
NORTH CAROLINA | FLORIDA |
N.C. Gen. Stat. § 105-134.2 (2009)
The minimum rate is 6% and the maximum rate is 7.75%, depending upon one’s income bracket and filing status. |
None. However, an individual domiciled in FL but maintain extensive connections (e.g., earning income off of rental property owned in another state) in another state may still be subject to that state’s income tax. |
GIFT TAXES | |
NORTH CAROLINA | FLORIDA |
None. The gift tax is repealed effective for gifts made on or after January 1, 2009. | None. |
GENERATION-SKIPPING TRANSFER TAXES | |
NORTH CAROLINA | FLORIDA |
N.C. Gen. Stat. § 105-32.7 (2009) None in 2010. North Carolina imposes a tax on a generation-skipping transfer in the amount of the credit allowable against the federal GST tax. The tax applies when the transferor is either an NC resident at the time of the original transfer or the transferor is not an NC resident at the time of the transfer, but the transfer includes either real or tangible personal property located in NC or intangible personal property (e.g., securities) that has a tax situs in NC. This tax is due on the same date as the federal return. |
None. |
INTANGIBLE TAXES | |
NORTH CAROLINA | FLORIDA |
None. | None. |
Both North Carolina and Florida have sales taxes.
Endnotes:
1. 1. Real property owned by a husband and wife is protected from creditors of one spouse but not from joint creditors. Exception: Protection may be limited when the Internal Revenue Service is the creditor.
2. 2. Separate property is defined in the NC General Statutes as all real and personal property acquired by a spouse before marriage or acquired by a spouse by bequest, devise, descent, or gift during the course of the marriage. N.C. Gen. Stat. § 50-20(b)(2) (2009).
3. 3. Real property (land, real estate) and tangible personal property are subject to estate tax in the state in which they are located. Intangible property is subject to estate tax in the state where the decedent is domiciled (residing within that state and with an intention to make that state his or her permanent residence).
4. 4. Source: David Pratt and Lisa Stern, Tax and Asset Protection Benefits Afforded Florida Domiciliaries, Fla. B. J. 32, 27 (Feb. 2010).