It's tax season, and homeowners in some states are apparently getting hit harder than others due to President Trump’s revised tax legislation.
During a press conference in early February, New York Gov. Andrew Cuomo argued that the New York State deficit is growing mainly due to changes in the tax code, specifically due to new limits to deductions for state and local taxes (SALT) from federal income taxes. Cuomo further claimed that because of this tax burden, wealthier New Yorkers are fleeing for sunnier pastures – specifically Florida.
As explained by Newsmax, which cites the Tax Institute at H&R Block:
“The tax law limits deductions for state and local taxes, including property tax, to $10,000. Under the new rules, a New Yorker with $10 million in ordinary income and a $10 million home would have saved $1,173,278 in total taxes by relocating to Florida on Jan. 1, 2018, when the law took effect. That’s an increase of $431,682, or 58 percent, from 2017.”
And while this may be bad news for New York, Floridian real estate sharks are already smelling blood in the water. Speaking to CBS Miami, developer Edgardo Defortuna noted that only seven units remain of the 192 constructed at Jade Signature, a luxury condo development in Sunny Isles Beach.
“Yes, the timing was perfect, and now we are targeting those buyers that want immediate gratification. We are finishing some of the units so they can basically bring their suitcases and move in,” Defortuna said, regarding the New York pharmaceutical and hedge fund CEOs who have purchased units in the $5 million -$30 million range at his property.
While states like New York, New Jersey, and Connecticut have some of the highest property taxes for homeowners in the nation, those in Florida are considerably lower. As Bloomberg reports, real estate executives like Daniel de la Vega, President of ONE Sotheby's International Realty in Miami, are now actively courting potential clients in Manhattan and Long Island specifically because of that tax differential.
And it's not just New York that is feeling the crunch. In the wake of Gov. Cuomo's presser, the Chicago Tribune ran an op-ed entitled “Yes, the Illinois Exodus is 'as serious as a heart attack,'” in which the paper’s editorial board laments Illinois residents absconding for Florida, Texas or other states with more reasonable tax accommodations. And while that particular piece is mostly an argument for austere government spending/against further taxing the rich, a trend is a trend.
Whether those with the means will continue to head south for all seasons remains to be seen -- and what 2020 will bring remains anyone's guess.
Mike Odenthal is a staff writer at The Cooperator.