Florida Bitcoin Taxes - A Guide Every Investor Should Read 

Over the past few years, cryptocurrency has gained popularity among traders, the media, and the general public. This is quite understandable, considering the fact that crypto investors have made some good returns.

But as you probably already know, cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin are taxable. Tax law considers virtual currencies to be property for purposes of taxation.

As such, virtual currencies are taxed just like real states and gold.

As the year draws to a close, tax season is just around the corner. It’s officially time to review your transactions and double-check the taxation laws in your state, as each state treats Bitcoin differently.

For example, according to research conducted by the Tax Foundation, the tax burden in Florida is among the lowest in the nation. However, residents need to know that not all taxes are the same, and the state collects taxes in a variety of ways.

We are going to take a more in-depth look at Florida Bitcoin taxes and review this state’s tax regulations in general. Then, we’ll give you some general tips about acquiring a Florida residency.

How Different US States Treat Cryptocurrencies

You'll have to pay federal tax on digital currency transactions regardless of where you live in the United States. However, since states impose taxes as well, some places are more crypto-friendly than others.

Here's some general information about these states, so you can better understand them.

• There are 43 states that levy personal revenue taxes. 
• Wage and salary income are taxed in 41 states.
• Interest and dividend income are the only types of income that are taxed in New Hampshire. 
• Those with high incomes in Washington are taxed on their capital gains. 
• Many brackets are clustered within a narrow income range in some states. E.g., with a taxable income of $7,000, Georgians reach the state's sixth and highest tax bracket.

Of course, investors or miners seeking to lower their tax liabilities will be drawn to states that do not collect income taxes on individuals or businesses. There are, however, three states that have been promoting crypto businesses with favorable tax treatment.

• Texas
• Wyoming
• Kentucky 

Cryptocurrency adoption is also on the rise in other US states, facilitating national adoption. BitPay became the new payment method accepted by Seminole County Tax Office in Orlando in 2018.

In fact, crypto innovation hubs are being promoted in Wyoming and Colorado through pro-crypto policies. Florida has also announced its pro-crypto stance following the introduction of crypto tax payments.

We’ll get to that one interesting taxation rule later. But first, let’s have a closer look at what taxes this state levies on investors and individuals.

A Look at Taxes in Florida

It is important to understand that each state's tax code is a complicated system filled with intricate details, and Florida is no exception. Knowing the basics of Florida's tax code is the first step to understanding it.

In 1924, Florida authorities amended the state constitution to prohibit income tax collection. Article IX, Section 11 provides the following information.

There shall be no inheritance tax or income tax imposed by the State of Florida on residents or citizens.

The question is, what are Florida taxpayers taxed on?

Florida collects the following taxes as its major taxes. 

• VAT (sales and use tax)
• Taxes on intangible assets
• Taxes on business profits.

Note: State taxes are levied on gasoline, diesel, and aviation fuel sales. It is also possible for counties to impose surcharges on fuel. You’ll read more about different types of taxes and exemptions soon.

Florida Sales Tax 

Sales tax does not apply to food and medicine. County sales taxes can be collected along with state sales taxes. In 2012, 55 of 67 Florida counties imposed local sales taxes on top of the state tax.

The sales tax rate in Florida is 6%.

Florida State Tax 

State income taxes do not exist in Florida.

Florida Business Income Tax

If they are not exempt, Florida corporations are required to file income tax returns (except when exempt).

Florida Property Tax

The state government receives no revenue from the property taxes in Florida since these taxes are assessed locally.

Property taxes in Florida are determined by the market value as of the first day of the year. 

Florida Tax Exemptions 

Below are some of the tax exemptions in Florida.

• An exemption of $500 is granted to Florida residents who are legally blind.
• Disabled homeowners can qualify for an exemption if they have a complete and permanent disability.
• Property taxes are exempt for individuals with quadriplegia who use their property as a primary residence. 
• A veteran who has suffered a disability by 10% or more in war or service-related incidents can earn an added $5,000 exemption on any assets they own.
• Added exemptions may be offered to the honorably retired and disabled veterans 65 and older who resided in Florida at the time they enlisted in the military service.
• An exemption of up to $50,000 is available to those who own a permanent residence for themselves or a family member.

Bitcoin Taxes in Florida

It is generally the goal of an investor — regardless of whether they invest in securities, businesses, or properties — to walk away with a bigger profit than they started with. Money, however, brings inevitable tax consequences with itself.

In addition to its zero income tax, Florida does not impose a state capital gains tax either. However, you should plan for taxes before investing, and a financial advisor can help.

Short-Term Taxes & Long-Term Florida Bitcoin Taxes

Capital gains earned from investment will be taxed at the federal level, but you won't owe Florida anything. Additionally, short-term and long-term capital gains are taxed differently. 

Note that short-term capital gains are taxed the same way as your ordinary income. In contrast, capital gains made over a long period of time are taxed at either 0%, 15%, or 20%. Depending on your total gains, you will receive a different tax rate. 

The schedule is as follows.

Asset Protection in Florida

The state of Florida has historically been a good jurisdiction for establishing and preserving asset protection arrangements. In case you don’t know what asset protection means, here’s a short definition.

Asset protection is about securing what you have invested so much time and energy to acquire. 

Let’s think of an asset as anything of value you hold.

Asset protection in Florida involves arranging your assets, like land, Bitcoin, organizations, and securities so that creditors cannot get their hands on them in the future. 

Anyone who has valuable possessions and wants to protect them from collectors should take steps to protect these assets. If you do not protect your assets, you may lose your life savings and investments to:

• Taxes
• Divorce
• Court judgments
• Nursing homes

An effective asset protection policy does not prevent creditors from getting court orders against your assets. It will simply make it difficult for them to collect those judgments. As a result, settling claims can be a lot easier. 

Additionally, it defends assets against theft or seizure.

Crypto Tradings in Florida

Florida Bitcoin taxes weren’t always so lenient. 

Florida House Bill 1379 identifies cryptos like Bitcoin and forbids the illicit trade of virtual currencies. Due to strict legal guidelines, it used to be illegal to sell Bitcoin in the state without a Money Services permit and compliance with the state's money-laundering laws.

Such limitations made Florida a troublesome state for investors and business owners to do Bitcoin-related activities. 

But now, following the passage of CS/HB 273, a transmitting of funds license is only necessary for a person intermediating funds. So if you don’t want to send virtual currency between locations or people, you’re good.

The state also has a limited Bitcoin mining industry as well. Yes, a few small companies mine cryptocurrencies in the state here and there. However, no major corporation has set up a mining facility.

Acquiring Bitcoin in Florida

There are several sites and companies that provide Bitcoin in Florida, and you can easily choose one according to your needs and preferences. Of course, users should better remember that different exchanges have different variables. These include differences in: 

• Transaction charges
• The maximum withdrawal amount
• Payment methods
• The process of verification.

Furthermore, Bitcoin buyers should be aware that some exchanges could ask them to get their own wallets before they can purchase the digital currency. 

Bitcoin wallets can be divided into three categories, and all of them are accepted in Florida:

1. A software application (such as an iOS or desktop wallet)
2. Hardware wallet
3. Cold storage (hard wallets, used as backups for your original wallet).

Now, back to the Floridian taxation law we mentioned earlier.

Florida Accepts Cryptocurrency As Taxes

The crypto community in Florida has received a great deal of support. Bitcoin is widely accepted by retailers both online and in physical stores throughout the state. 

According to Governor Ron DeSantis, the US state of Florida is happy to accept taxes in cryptocurrencies like Bitcoin as payment from businesses located there. But this law would only apply to businesses operating within the state rather than individuals.

So, now you know why so many individuals and crypto-based businesses are interested in moving to Florida. Read on if you’re also wondering whether you can get Florida’s residency and enjoy the tax benefits or not.

Can I Change My Residency & Live in Florida?

It is common for individuals to want to become Florida residents in order to avoid state revenue and inheritance taxes. There are also people who want to become Florida citizens in order to benefit from its asset protection provisions.

Individuals should realize that moving to a new location is not as easy as announcing it. There are a variety of criteria for setting up a domicile in each state. However, most require that you live in the new state for a long period of time. 

As an already registered Florida resident, you must meet the basic residency criteria by following the listed steps. 

• Recording a domicile declaration 
• Florida driver's license application
• Establishing residency
• Getting your out-of-state vehicle registered
• Voting registration. 

This is how the detailed process looks.

Record a Declaration of Domicile & Maintain Physical Presence

It is necessary to file a Declaration of Domicile to prove Florida is your main place of abode if you live in two separate states.

Official notification of domicile is one of the most convenient methods to confirm your residency in Florida. Simply put, it indicates your desire to keep a permanent address in Florida.

But remember that it is one thing to declare your domicile and another thing to prove it. In other words, it’s actually necessary for you to relocate your place of residence to Florida. Consequently, establishing residency in Florida means spending and taking advantage of your time there. 

In addition, having a real presence in Florida throughout the year is necessary to establish residency in Florida for state income tax purposes.

Register Your Car & Get a Florida Driver's License

Transferring your driver’s license to Florida is one of the first actions you can take toward setting up residency. Following your residency establishment, you will have 30 days to complete this process.

Obtain your car's registration in Florida and transfer the car title. Once you have established Florida residency status, you have 10 days to complete this process.

Other Actions to Establish Your Residency

Here are some things you can do to truly establish your residency in Florida.

• Find a local Florida doctor to be your main care physician.
• Take up a position in Florida.
• Any social groups or subscriptions from your old state should be left behind.
• Make sure the Social Security Administration is notified of your address update.
• You must provide proof that you have paid utility bills related to the permanent residency application.
• If possible, send your child to a Florida school.
• Make sure you are registered to vote in Florida.
• If possible, sell any real estate in the former home state.
• Prepare and file your federal tax return as soon as you become a Florida resident. 

Seems rather easy, doesn’t it?

Well, it isn’t. In fact, relocation to a new state comes with many responsibilities and requires tons of planning. The good news is that there are financial professionals who can help make it easier for you.

Consult A Financial Advisor

Having a solid and long-term financial plan is essential for taxpayers in the US, especially if they plan on moving to a new state. 

A financial consultant looks at the totality of a client's finances, such as debts, investments, costs, and income, in order to determine what goals the client should set.

Consult a professional financial advisor from Lorenzo Tax if you need assistance with capital gains tax or any other investment. 

We offer a wide range of services based on our knowledge of the latest tax and planning strategies. Schedule a call, and we’ll help you handle everything from there.

Conclusion

The state of Florida does not have an income tax, which means that there is no capital gains tax as well. Although, you’ll still be required to pay capital gains taxes if you gain wealth from investments. 

Once again, this will differ according to whether the money comes from short- or long-term investments. So be ready to file your federal capital gains tax once you sell and make a profit from your investments. 

There is no doubt that Florida has earned its reputation as a tax haven. Retirement income is also not taxed because there is no state income tax, as previously stated.

With that, all that’s left for Floridians or those intending to move there is to speak with crypto financial professionals who can guide them through filing their taxes and figuring out the state laws.

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