Do Snowbirds Pay Taxes Here or There?

For many people it seems that snowbirds lead a great life, migrating south to avoid cold New York winters and returning to escape uncomfortable Florida summers so they are always living in a pleasant climate. Even better, by having nests in both states, they always inhabit a cozy home. There are, however, a few possible snags. A major one may be failing to handle taxes properly. If you don’t work with an

attorney intimately familiar with the snowbird experience, taxes may not be the only parts of your estate planning that go awry.  

Residency Status and Domicile

Domicile status gets top billing when it comes to paying taxes since domicile is typically defined as the place you consider your permanent home. If you have lived in New York for an extended period of time, changing domicile status requires proactive steps on your part. It’s important to remember that, while a no-income-tax state like Florida may not care where you decide to live, a state like New York, which not only charges state income tax, but a higher sales tax rate, will definitely be reluctant to see you leave. 

Where do you spend more than half of the year?

Typically, the major criterion for determining your domicile is how much time you actually spend there. To claim you are a permanent resident, you are usually required to spend at least 183 days per year in that state. This can be tricky to prove, depending on small details, such as what time of the day you travel back and forth. Tax auditors have been known to find credit card receipts for restaurants, gas, rental cars, or purchases to prove that you were in the wrong state at the wrong time.

Changes that Can Help Prove the Location of Your Domicile

As a sharp attorney who deals with snowbirds and their taxes, as well as their estate planning, will tell you, the more consistent you make your credentials, the easier it will be to prove to tax authorities the your domicile is in the South. Altering your address on the following documents can give you much better leverage:

• Driver’s license
• Voter registration
• Car registration
• Passport
• Bank accounts

Other memberships in clubs or organizations in the region of your chosen domicile — such as religious groups, fraternal organizations, libraries, gyms, etc. — may also help you to convince New York tax authorities that you are not responsible for paying New York State tax. Be aware, though that the more substantial your income, the more resources the state government is likely to expend in trying to keep you tied to your New York residence. Believe it or not, in fighting to prove that individuals haven’t truly relocated, tax investigators may pull out all the stopst. In one case, a northern state tried to convince a judge that the fact someone had a burial plot on its territory meant that the person considered that state his/her permanent home.

Have an Attorney Keep You from Getting Trapped

States usually share information with the IRS, so if you don’t use your preferred address on your federal tax form, the discrepancy may well be noticed. State governments are aware that some snowbirds will temporarily “move” their domicile to Florida because they want an especially large taxable transaction to be recorded in a no-tax state. For this reason, many high-tax states have a “look-back period,” meaning that if you return to live in their state within 6 years, you may be accused of gaming the system.

It is clear from the above content that if you are a snowbird and want to avoid being overtaxed, you need a clever attorney to assist you, one who is experienced in the complex and intricate laws that apply.