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Changing Permanent Residence: State Tax Auditors Suspicious of Retirees

Jun 20 2016

Written by Jason C. Henbest, Esq. and Brittany Saxton

Living in the Northeast is considered to some a blessing and a curse.  We are fortunate enough to experience all four seasons, yet sometimes the burden of maintaining a home in the winter months is too large.  The common trend for retirees is to have another residence in a warmer, southern state to reside for the cold, winter months.  However, when retirees begin to claim this second state as their permanent residence, state tax auditors become suspicious of these claims.

Tax auditors in states such as California, New York, Massachusetts and Minnesota are unlikely to let people with multiple homes claim primary residence in a no-income-tax-state without a fight.  States like New York are quickly losing residents to warmer states like Florida, which have low or no income tax.  Unfortunately, retirees who split their year between states and claim permanent residence in a state without income taxes may face months of intense scrutiny—and even possibly litigation.  State tax auditors are willing to probe and examine very personal details to determine the true domicile of a person.   

A domicile is a place where you have a permanent address, intend to return after leaving for periods of time, and maintain memberships; where you participate in clubs, spend money to support businesses, keep valuable items, and have ATM withdrawals; where primary bills are paid, you have a driver’s license and have registered to vote.  A few of these examples taken together can help prove a permanent change in residence.

Yet in half the states, rather than proving your domicile through an amalgamation of evidence, this requirement is easily met by living in the state for more than half the year.  The bright line rule provides that after spending more than 183 days in that state, you can—and should—claim it as your domicile.  For the other half of the states that do not provide this bright-line rule, it is important to keep records of your activity in the state (i.e., toll payments, receipts from hair appointments, copies of bills, etc.).  However, big decisions such as this need to be made under the advice of an experienced attorney and other financial advisors.  These professionals can provide proper guidance that will relieve your anxieties as a retiree.

Lanoka Harbor, Forked River and Lacey Township Lawyer | Retirement | Income Tax | Elder Law