Tax implications of residency changes

Generally speaking, any part of a day spent in a state counts as a day. If an individual were to enter a state and head to their office for work, catch a ballgame or meet a friend for dinner, that’s a day, regardless of the overall time. What if a person merely enters a state to catch a plane? What if they stop for lunch or pick up a traveling companion on the way to the airport? What if instead, the individual enters the state for in-patient medical treatment for a serious illness? Would it matter if the medical treatment was elective, not serious or done as an outpatient? Questions abound and need to be carefully considered when counting days towards a statutory residency test.

Similar to the day count, we can apply a general rule: if a taxpayer has a home that is winterized, has a kitchen, a bathroom and is available for their exclusive year-round use, it is a permanent place of abode. Once again though, a plethora of exceptions and uncertainties exist. What if you have a simple log cabin with no heat or utilities in cold and snowy upstate New York? What if you bought your adult child an apartment of their own? What if you have access to a corporate apartment? Would it matter if the corporate apartment must be reserved on a first-come-first-served basis?

Both in determining days spent in the state and whether a permanent place of abode exists, facts and circumstances matter and must be carefully considered in determining whether a taxpayer is a statutory resident.

A state will often look to the nature, use and size of different residences. For example, if a married couple with two young children has a sprawling estate in the suburbs of Philadelphia near the kids’ schools and a nice, but small apartment in Miami Beach, the primary home is obvious. When dealing with a taxpayer that has adult children and evenly splits their year between two similarly sized and similarly valued residences, the differences are more subtle. So, we consider another factor.

If the taxpayer still works, work location is crucial. For example, what about a taxpayer working out of a Seattle office when home, traveling extensively for work and then heading to their home in Jackson Hole, Wyoming when they are able? Again, that makes for an easier finding, Washington certainly appears to be the state of domicile in this category. However, what if the taxpayer is a remote worker with no office or retired? Business involvement then plays less of a role, so we move on. 

This category often involves some overlap with a statutory residency test. If an individual has a home in Pennsylvania and by their own admission spends more than 183 days there, they are at least a statutory resident, case closed. Many individuals have multiple residences and time in one location becomes a more important factor. Often, although not rising above a 183 day threshold, more time is clearly spent at one single location when compared to other residences, but some individuals do evenly split their time between different residences, or travel extensively for work or pleasure. In such instances, the time factor might not point to one particular domicile. 

Many people have items of high sentimental or economic value, whether an expansive and expensive art collection or important family heirlooms. Taxpayers commonly say, “tell the auditor that I keep everything of value in Florida.” Auditors can and do check on local residences. They tour the house and see what they find. Once again, this category is often obvious. A professionally decorated home with artwork and family photos clearly wins out over a more sparsely decorated home in Florida with bunk beds. As with the other factors, taxpayers often have similarly decorated homes. In such instances, we move on to our final primary factor. 

This is often the most personal and intrusive factor. Familial relationships, how often taxpayers see their children or parents and where and with whom they spend holidays is crucial. Perhaps the extended family is all back home in San Francisco and all the holidays are spent there. Maybe holidays are instead all spent in Florida, and family is scattered across the globe. Maybe once again it is an even split between states. If all of the above-mentioned factors end in a tie, then it is more important to consider other factors such as bank accounts, car registrations, voter ID or homestead property tax rebates.