As sunny South Florida continues to develop into a world-class locale, and a legal tax haven, many New Yorkers are reconsidering whether the city that never sleeps is the right place in which to live and park their assets. But few know how challenging the process can be for those within a certain tax bracket… Lucky for you, I have the scoop.
I’m a New Yorker through and through – born in Brooklyn, an NYU grad, and job-creator for hundreds of locals through three different companies I founded in the city. More than 35 years later, however, I realized that perhaps the concrete jungle wasn’t the best place in which to take the next step in my career, and continue to grow my net worth. The tax burden, and exorbitant costs that come with living in one of the world’s greatest cities are steep. This is common knowledge. A lesser-known fact, however, is that it’s a massive headache to relocate from New York to a new state once you reach a certain rung on the financial food chain. The state of New York doesn’t let its prized residents flee so easily, a fact that is especially salient today as prominent figures and institutions – Icahn Enterprises, U.S. President and Queens native Donald J. Trump – are stealing headlines for relocating to Florida, just as I did in 2014.
My move was prompted by the same factor that promoted Carl Icahn and Trump’s – the math simply was no longer working out. The family I had always wanted had materialized, and as my wife and I began researching elite schools for our daughter, which were practically the same cost as a state University, the siren song of sunny South Florida began calling me. We knew we wanted a bigger family, and the financials were not making sense. While I’ve never looked back on the decision to relocate, I urge anyone considering following in my footsteps to educate themselves on what the process will entail and be both mentally and financially prepared.
When my wife and I decided once and for all that New York City was no longer the place we wanted to be in and grow our family, we considered the alternatives. Many of our friends who also had kids had begun to relocate to the suburbs – Westchester, Long Island, Connecticut – but none of those locations seemed like the right fit for us.
We had begun trekking down to Sunny Isles – a town just north of Miami Beach – on a regular basis because we had family there. My daughter would spend all day on the beach and grew to love the ocean and sand. Swim lessons weren’t $150 a pop, and we didn’t have to search to find a big spot in the pool to practice her strokes. We also quickly learned that some of the best restaurants in New York were opening up in South Florida. The concerts that rolled through the Barclays Center, Giants Stadium, and the Garden were also coming to the Hard Rock and American Airlines Arena. I was on East Coast time, without the agita – and the crazy high taxes, of course. Looking at all these factors, we decided it was time to fly South, for good.
Shortly after I called my accountant and my lawyer to get their advice on how to handle my move. Each phone call came with a warning that gave me a blistering headache: “You will definitely be audited.”
As soon as I informed my team of trusted advisors (besides my wife, of course) – accountants, lawyers, and other white-collared experts – I heard the same thing: “If you say you’re going to move to Florida, you have to genuinely do it.” A lot of people say they’re moving, but really they’re just getting a vacation home in Boca Raton. And that doesn’t fly with New York State. Either way, I knew I was going to get audited.
This was in 2014, before the mass exodus from the North East really got going. I had no idea what was coming my way. No one I personally knew had experienced and withstood the pressure of the process known as a Residency Audit.
The New York State Department of Finance typically reserves this bureaucratic beating for people who make a certain amount of money per year or more and whose assets pass a specific threshold of value. But don’t be fooled – if you’re bringing in a few hundred thousand dollars a year in New York City, you’re most likely going to be a candidate for the Residency Audit if you relocate to a different state.
What I learned and went through was a full course in taxes, law, organization, follow through, persistence, and grit. You don’t just get to move to Florida. You have to commit to proving that you want to live in Florida. Actually moving –the furniture, the art, the kids’ stuff, your wife’s oversized wardrobe, the cars – is just half the battle.
Home is Where the Heart Is
So you have your home in NYC, and now you have a condo in Miami. Rule No. 1: The new apartment/house has to be bigger or at least the same size as the NYC spot, to truly prove that this isn’t just a pied a terre. You have to show them you are either upgrading or moving to a comparable residence. Another thing: If you have artwork, family photos or wedding albums in your New York home, and you don't move them then prepare to answer a lot of questions. Those items carry both market value and sentimental value. You should be moving those as soon as possible. Also be prepared to decorate your new home with plenty of family photos – it wouldn’t truly be a home without a portrait of you, the wife, and kids in matching denim shirts. “Home is where the heart is” isn’t just an adage – New York State has co-opted it as an umbrella term to determine whether one is truly relocating, or simply evading their tax bill. A few more things to seriously consider doing: Did you get new doctors? Are the kids enrolled in a new school? Have you joined a new place of worship? Did you get a Florida license plate? Florida driver’s license? Did you register to vote in Florida? Did you file a declaration of Domicile? Did you move your safety deposit box to a local branch?
At the time we also had a house in Montauk that we would stay at in the summer and we wanted to continue to use it. Believe it or not, many Floridians head north (or west) during the hot and humid summer months. Summer house ownership out East proved to be problematic and we ended up having to prove that we rented it during those times to be 100% transparent that we weren’t ‘maybe’ living there (we weren’t). I eventually sold it a year later because it was just becoming too burdensome. It’s probably why most people from Miami go to Aspen instead of the Hamptons in the summer.
I was told to do everything mentioned above quickly after moving by my advisors. Granted, these are all things I would have done anyway, but I might have taken my time, had it not been for the insistence of my lawyer, accountant, financial planner, etc. You can’t consider your new city a home without the above. (And of course, you have to prove you’ve done all of this too. Keep all that paperwork and file it away in an organized fashion.)
Burden of Proof
The burden of proof is on you to show you are a resident of your new place. It’s on you– receipts, official paperwork, notarized papers, etc. I went as far as quickly getting my Chelsea residence rented out to prove I didn't live there anymore. I didn’t have an office in NYC anymore, but if you have a business or office in NYC and are the principal of your firm, you need to move that too. Being a fitness enthusiast, I hired a personal trainer at the gym in my building to show I workout consistently in Florida. I forwarded all of my mail to Florida. Even though all of these transactional exchanges were happening, I wanted something to prove that I really was where I claimed I was. I even downloaded an app called FollowMee, and I set it to record my GPS coordinates every two hours. It keeps a log of everywhere you go, and I did it for 2 years. I kept Uber receipts to show I was using Uber in Florida. I got new dry cleaners places, a new hairdresser, and saved all credit card statements. And it wasn’t enough to show them the lease that my new apartment tenant in NYC signed. I had to show them the rent money being deposited into my account – a real person, transferring real money, into a real bank account. The State of New York even made me sign a waiver with AT&T granting them access to my GPS coordinates directly from the cell phone company.
Behind the Scenes
The New York State Department of Finance came after me within weeks of my filing taxes as a non-resident. My welcome present after arriving in Florida was a handwritten envelope from New York State with an audit letter in it. It is daunting and they knew it would be. I spent many hours organizing, scanning, copying, downloading hundreds of statements, keeping receipts, organizing them by date, tallying up numbers – basically all to prove what is true and self-evident.
Someone gave me the advice to NEVER talk to an auditor directly. They can confuse you and harmless words might lead down a rabbit hole unnecessarily. All they need are documents and proof; you should never “talk” to anyone. It doesn’t help. Get an excellent accountant or lawyer that has experience handling residency audits and let them do all the talking.
The Cost
Of course I didn’t go through this saga alone. I had the best of the best professional help on my side. I had to find the best accounting firm to represent me. I told them everything and for a first timer, I guess I surprised them. “You have a strong case,” they said. “You’ve prepared better than almost anyone else we’ve spoken with in this situation.”
It’s not just a lot of time and effort to move through the Residency Audit. It also costs a lot of money – roughly the annual salary of a good NYC lawyer, in my case. And that’s just hard cash being funneled to lawyers, accountants and the like. The sum doesn’t account for time lost including all of the meetings, commuting miles, and used brainpower hours.
I’m a very organized person and I went above and beyond what many others may think to do. They aim to get a settlement out of you. Obviously if you really did move then there is no reason to settle.
Statistics say that NYC millionaires can save $1 million a year by moving to Florida. And the top 1 percent of earners account for nearly half of all Big Apple’s income tax revenue, according to WalletHub.
No wonder they fight so hard to keep you around.
Was it Worth It?
You have to really want it to go through what I did over the course of almost two years. Realistically my quality of life is higher, I save a lot tax wise, and my daily life is cheaper when you consider a family, swim lessons, piano, tutors, personal trainers, and food. Your dollar goes a lot further down here. And there isn’t a lack of successful hard working people here. In fact, many are not only successful but are also much more down to earth, practical and nicer; most also vow to never wear a suit again.
But think about this: In NYC my maintenance was around $1.75 per square foot. That for an apartment without a single building amenity other than a doorman. The maintenance on my apartment here in Miami is around $1.08 per square foot (Almost 40% less!). It comes with a full spa, 2 restaurants, front gate security, 110 employees, a gym with classes every day like yoga and pilates, two studios, two pools, and a huge beachfront with pool and beach service. There’s also an event space, a hair and nail salon, and much more.
My answer? Yes, it was worth it. I love NYC but I’m not going to pay taxes to a city and state that I don’t live in or where I don’t use the services. I live in paradise now where I work, play, workout everyday, and even get to spend more time with family and friends. NYC served its purpose and I go back occasionally and usually only for a few days because I miss Miami when the blast of cold, rain or dirt hits my face as soon as I land in the airport. I’m going back next week for Startup Bootkamp where I’ll help future founders and startups learn what to expect and how to make it in business. I do look forward to my quick visits.
I found that despite the slightly slower pace of Miami, my work continued to grow at its usual clip. My wife and I made friends super easily and our daughter fell in love with all things outdoors on the beach. We actually see our friends and family from NY more because when they come visit us in Miami they are in vacation-mode and can spend several quality hours or days with us instead of a rushed late night dinner in NYC that may happen once every few months.
I’ll never forget that moment that we decided our new home would be in sunny South Florida. It was on the second day of our “one-month trial” down here, and my wife put up the shades in the morning, as we overlooked the beach and ocean with the sun just coming up. She looked at me and said, “I don’t ever want to go back to New York.” So we didn’t. New York State is right – home really is where the heart is.
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