Living Aboard

From time to time many of us have thought about calling in the auctioneers, selling the house, and moving to the boat for a life of gently traveling from place to place.  Several questions came up when I began to look into this a little more seriously and found answers hard to come by.  Here are some of the questions along with some suggestions for answers.  I’m reluctant to actually call these answers because they may be terribly wrong.

Where to live

Here are the assumptions I made in deciding where to live:

• The weather is warm or hot much of the year
• Personal income and property taxes are low and pensions are not taxed
• Sales taxes do not apply to food and prescription drug purchases
• Crime rates are low
• There are marinas in fresh water ports.

And the Answer IS?

Florida.  Let me expand a bit.  I see myself traveling up and down the ICW as the seasons change.  Florida in the winter - somewhere further north in the summer.  I also see myself continuing my residency in Pennsylvania.   I considered several warmer locations in the US, including North Carolina, South Carolina, Georgia, Florida, Texas, California, and Hawaii. 

By far, Hawaii has the best weather year-round.  Florida and California (Southern) are tied for second in the weather category. Georgia and Texas are next.  I know that Texans will disagree with me, but I've been in Gulf waters that approached temperatures of 90 degrees.  It's just too damn hot.  While the hurricanes devastated Florida last year, such damage is not usual, no matter what the insurance companies say.

Florida wins on the tax front, with some limitations.  Florida does not have a personal income tax but they do have a 6% sales tax with some locations being higher.  Florida also taxes its residents with something called an Intangibles tax on all cash or near cash holdings worldwide.  This can be a significant amount if you have extensive cash, stocks, bonds, or other negotiable securities.  Overall, Florida ranked 45 in terms of total tax burden by the state.  Texas is another state that does not have a personal income tax, again with a high sales tax rate. Hawaii is fourth highest in overall tax burden and California is 26th.  Pennsylvania does not tax pension income, has a favorable sales tax rate (especially when close to Delaware, which has none), and a flat, low income tax.  One final note on taxes, houseboats and yachts (boats over 40 feet in length) can qualify as a personal home, along with the tax benefits associated with selling a home, such as forgiveness of capital gains.  (Hey, it could happen!)

Crime rates are very tricky to predict and, really, to report.  Some areas with low crime rates have substandard police departments and other jurisdictions find a value in underreporting crimes.  I was surprised to learn that Myrtle Beach SC and Wilmington NC both had very high crime rates, as did Miami and Fort Lauderdale.  Punta Gorda's reported crime rate sort of hit in the middle.  These figures were compiled before the hurricanes brought in the out-of-state contractors.

As for the marinas in fresh water ports, Florida has the extensive St. John's River and canal system, as well as Lake Okeechobee. 

My conclusion is to travel to Florida in the winter, come back to the Chesapeake Bay in the summer mainly to avoid staying in Florida for sixth months and a day that would activate the Intangibles tax.  I'd keep a Pennsylvania residence to keep my total taxes lower, mainly by avoiding taxes on pensions and retirement income.  Even this is tricky.

Residency

One of the questions that required an answer before determining the best tax rates was where did one live if one was on a boat, moving from port to port?  I could not find any governmental requirement that one actually have a state of residence.  For example, Florida will issue a driver’s license to you without assuming that you are a resident.  Florida sees a driver’s license as the intent to establish residence.  However, registering a motor vehicle or purchasing property in Florida may establish residency.  This begs the question of how one establishes residence in a state.  Residents of Alaska have the lowest tax rates.  Could I become an Alaskan while living on my boat, moving up and down the east coast?   Do I even need a state of residence to have a bank account?  I can do on-line banking and have bills automatically paid, like credit cards and cell phone charges. The US military handles this in an interesting way.  The Department of Defense (DOD) keeps a “home of record” to calculate travel allowances.  For example, you may have a home of record where you enlisted.  Then DOD has a domicile, or the place where you actually live.  This is where you pay state income taxes.  I see the home of record as similar to the home port of the vessel.

One possible problem is motor vehicle registration.  Boats, even motorless boats with sails, are considered motor vehicles.  My boat has to have a valid state registration, even if it is a documented vessel.  Florida charges a 6% sales tax on vessels being registered in Florida.  This tax does not apply to boats registered in other states and transferred into Florida.  Delaware charges no sales tax and has low registration fees.  However, many states require your registration in their state if your boat resides in their waters for a certain period of time.  For example, newly purchased boats in Florida must leave Florida water within 10 days, be fined, or register with the State.

Would it be feasible to set up a corporation in Delaware (for about $100 per year) and use the corporation to own my vessel and vehicles?  I would not want to have Delaware as my state of residence because of high income taxes and a tax on pension income.  As attractive as this may seem, it probably is not a good idea since I would have to pay corporate income tax to Delaware at a higher rate than Pennsylvania income tax.

One Last Consideration

I only considered locations in the US.  Several members have friends/relatives/themselves in Mexico and Costa Rica.  This is certainly something worth looking into.