Leaving Pennsylvania or New Jersey for Delaware or Florida: The Real Math

On income, no; on death, arguably. Pennsylvania does not tax Social Security, pensions, IRA or 401(k) distributions for retirees, a full exemption more generous than Delaware’s $12,500 exclusion and most states’ partial breaks, with a flat 3.07% on what it does tax. The real Pennsylvania cost is the inheritance tax: 4.5% on transfers to children and grandchildren, 12% to siblings, 15% to others, with no exemption threshold, due on essentially everything including the house. A $900,000 estate passing to two children owes roughly $40,500. That single line is what sends Pennsylvania retirees shopping for Florida domicile, and it is a legitimate reason, but it should be weighed against what the move actually costs: transaction costs on the house sale, higher insurance in Florida, and distance from family, the thing every downsizing survey says matters most.

Delaware’s pitch to a Philadelphia-area retiree is proximity plus three tax facts: no sales tax, no estate or inheritance tax, and property taxes among the region’s lowest (roughly 0.5 to 0.6% effective, so a $400,000 home runs near $2,300 a year, versus five figures in much of New Jersey). Income tax is graduated to 6.6% above $60,000, softened for retirees by a $12,500 per-person exclusion at 60+ covering pensions, IRA/401(k) distributions, and investment income; Social Security is untaxed. Age 65+ homeowners get a senior school property tax credit up to $500, though movers establishing domicile after 2018 need ten years of residency to claim it. The honest comparison for a Pennsylvania retiree: you trade PA’s full retirement-income exemption for Delaware’s inheritance tax elimination, cheap property taxes, and no sales tax. For New Jersey retirees, Delaware wins on almost every line.

Florida has no state income tax, no estate or inheritance tax, a homestead exemption, and the Save Our Homes cap holding assessed-value growth to 3% a year on a homestead. Against Pennsylvania, the income tax win is modest for retirees (PA already exempts retirement income); the inheritance tax win is real. Against New Jersey, both wins are large. The costs are equally real: homeowners insurance in Florida runs multiples of Mid-Atlantic premiums and has been rising, condo owners face post-Surfside structural reserve requirements that have pushed association fees sharply higher, and the move puts a thousand miles between you and the grandchildren, which is why the half-year snowbird pattern is so common. Snowbirding, though, means your domicile is a fact question the old state can audit, and that is where planning matters.

Domicile is intent shown by conduct, not a form. The framework both states apply: where you spend time (the 183-day statutory residency test is the hard floor: exceed it in the old state while keeping a home there and you are a resident regardless of intent), plus the factor pattern auditors read: which home is larger and more used, where your doctors, accountants, and congregation are, where you vote, register vehicles, hold your driver’s license, claim homestead benefits, keep the items you would grab in a fire, and where your family gathers. The playbook: file Florida’s declaration of domicile and claim homestead (or Delaware’s equivalents), change license, registration, voting, and estate documents within weeks of the move, keep a day-count log, and file part-year returns for the transition year. Half-measures invite residency audits, and New Jersey’s are notoriously thorough.

Usually before, and the sequencing is worth real money. Selling your principal residence while still a resident keeps everything clean: the federal $250,000/$500,000 exclusion applies, Pennsylvania does not tax the excluded gain, and New Jersey residents avoid the nonresident withholding entirely. Move first and sell later and the picture degrades: the New Jersey house sale now carries the GIT/REP nonresident estimated payment at closing (the greater of 2% of price or tax on the gain), and if you rent the old house out for years first, part of the Section 121 exclusion can erode. The clean sequence: sell the old primary residence, close, then execute the domicile change, then buy or settle in the new state. Families keeping the old house as a rental or family compound should price the estate and income tax consequences of that choice deliberately, not discover them.