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Florida Tax Haven Benefits for Hedge Funds and Private Equity

Florida’s stable and highly favorable tax climate provides advantages that make a Florida location profitable for every type of business. Historically all types of businesses have enjoyed doing work in this great state, especially businesses in the financial and services sectors. But in addition to those sectors uprooting to the sunshine state, more recently, private equality firms and Hedge funds have seen the positive tax benefits and are moving their businesses to Florida. With the desirable state tax incentives and high hedge fund activity Florida is attracting many people to the industry, such as:

  • Prime brokers
  • Attorneys
  • Fund managers
  • Other service providers

Businesses have seen federal tax rates skyrocket and will continue to do so with these new changes:

  • 8% Medicare tax on investment income
  • Additional .9% Medicare tax on business income
  • Additional 5% personal income tax on high income earners
  • Additional 5% in capital gains tax

Business owners have no control about the imposing Federal taxes but you can see why its important to look beyond the taxes you pay and focus on the taxes you don’t pay. Florida’s business friendly taxes appeal to business owners and businesses continue to see benefits of working in this state.

Open-minded legislation ensures that Florida remains a worldwide hub for new and expanding businesses. Here are some Tax Advantages for Florida Businesses:

  • NO corporate income tax on limited partnerships
  • NO corporate income tax on S-corporations
  • NO corporate franchise tax on capital stock
  • NO state-level property tax assessed
  • NO intangible personal property tax
  • NO property tax on business inventories
  • NO corporate income taxes on flow-through limited liability corporations

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Here are a few current Florida Business taxes:

  • Sales and Use tax of 6%
  • C Corporations have a 5.5% Corporate income tax rate (corporations that pay taxes in their own right)
  • Similar taxes and fees used in other States, such as: County Surtax, Unemployment Compensation Tax, Documentary Stamp Tax, Ad Valorem Property Tax, Transfer Tax, etc.

Here are a few current tax CREDITS for Florida Businesses:

  • New Market Tax Credit
  • Community Contribution Tax Credit
  • Similar Capital Investment Credit
  • Enterprise Zone Jobs and Property Credits

Now lets compare state and city taxes of the Sunny State of Florida to the popular Northeastern States (Connecticut, Massachusetts, New York, Pennsylvania). We will compare $1million in personal income and an estate valued at $10 million.

 FloridaNortheastern U.S.
State and Local Personal Income Tax$0$52,000 to $105,000
Estate Tax$0$960,000 to $1,499,000

It is clear to see that there are many benefits to living in Florida than just for businesses. Some tax advantages of Florida residents include the following: no personal income tax, no estate tax (as shown above), no generation-skipping transfer tax, no withholding tax on non-resident shareholder income, and no income tax on trusts. Not only can families enjoy the sun, beaches and fabulous culture Florida has to offer, they can save more money.  With all the wonderful universities, public/private schools, and amazing real estate you can see why Florida appeals to all kinds of people and families.  Not only do families get to enjoy the luxurious lifestyle of living in Florida, businesses can too. There are more than just great tax benefits that appeal to a business when deciding to relocate to Florida. Aside from the continuous sunny temperatures, the oceanfront or inland office real estate is at its prime. Combine the views with various national airports, equipped for private or commercial flights, (many with direct flights to the northeast) an educated workforce and access to the Caribbean and Latin markets, it’s easy to see all that Florida has to offer.

Funding for Real Estate Projects

With a decline in state revenue, resulting from a weakened economy and the federal government reducing state government funds, many states are looking for ways to replenish their states’ revenue. Specially falling upon revenue from high-income earners. Another area states are focusing attention is to the residency status of taxpayers who are no longer filing in the state or those who have changed their tax reporting to either non-resident or part-year resident. When deciding a taxpayer’s residency, there is a two-tier guideline in which States follow. The first guideline is the number of days a person is physically located in the state. If it’s more than six months, the taxpayer will be taxed as a resident. The second guideline a state follows is if the taxpayer is in the state for less than six months but is considered to be “domiciled” in the state, then they will be taxed as a resident. Domicile is decided by many different facts and circumstances, such as: schools of any dependents, doctors used, activities and clubs the tax payers involved in, any religious factors, where other close friends and family live, as well as the location of the taxpayer’s personal residence. The taxpayer needs to make Florida their home, in order to receive the “no tax” benefits of Florida.  

As more and more of these private equality firms and hedge funds relocate to Florida their employees will benefit greatly from the low cost of living and personal tax credits and advantages. Seeing as many of these companies work all over the world and a certain location of their business is not necessary. The additional income of these employees is a great benefactor to decide to relocate. The infrastructure of Florida’s lifestyle is such that it can acclimate to the suburban families, the millennial’s, and the high-end city individuals. There is a community and lifestyle that will meet everyone’s needs when moving an entire company to this amazing tax-free state. Both business owners and employees will benefit greatly from all Florida has to offer.

Many businesses have and continue to be successful operating in Florida. When you combine all the other business advantages along with the excellent tax advantages and the excellent quality of life it is easy to see how the cost competitive environment of Florida is unbeatable.

Contact us for more info about tax strategies for Hedge Funds and Private Equity. 

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FAS CPA & Consultants

9000 SW 137 AV Suite 224 Miami, FL 33186 T: 786-462-7899 E: support@fascpaconsultants.com

Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA is a Certified Public Accountant, specialized In Tax Planning, International Business, Wealth Management and Offshore Banking. You can email him to fa@fascpaconsultants.com or follow us on Facebook : FAS CPA & Consultants.

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