New guy from AZ and Utah (snowbird)

[Bill55AZ]

I was "retired" at age 58, with 1 year more than the minimum for the company I was working for....aka downsized, and could not find another job for a year, so I quit looking.
Money was not the problem, having something to do was the problem.

I am now 66, retired Navy Reserve, on social security, plus a small amount from the 2 civilian companies I worked for. I got an unexpected financial windfall, in the form of Parkinson's, which the VA connected to agent orange and Vietnam. They gave me 30% disability comp at first, since upgraded to 100%. Looking back, I had that long before the tremors started, but the doctors didn't consider it as the cause for my balance and manual dexterity issues until much later. My disability and Navy retirement is tax free.
Wife is retired AZ teacher, and on SS as well. She has a decent amount in her IRA, mine was mostly spent building the Utah house.
We are doing well, live in the 2 states where we have grandchildren.
I was born paranoid relative to financial issues, watched my parents do almost everything wrong, and did my best to avoid their mistakes.

I have questions about state residency/tax requirements. We file married, joint on the federal return, but with all but $25K of my retirement tax free, and the wife making about $70K, zero debt, etc., I am thinking it might be better for me to claim Utah for tax purposes and the wife claim AZ. Since we live in Utah half the year, have a home there, a truck registered there, and we have a house and car in AZ, it just seems like I should, but a tax advisor said pick the state that collects the least and both of us file there. If that isn't correct, we could end up in a bind.
With all the snowbirds in this country, it seems like there should be someone out there who understands this issue.
AZ is definitely a better state for retirees, they don't tax Social Security and give partial breaks on govt retirement pay which the wife qualifies for as a teacher. She should definitely stick with AZ.
But for me, the last thing I want is the state of Utah deciding years from now that we owe them money for the last decade or so...
Hoping to learn some good stuff here, and perhaps even sharing some good ideas for you younger folk. Times are getting weird, we worry about our kids and grandkids...

 

[Rowdy]

Welcome Bill55AZ. I'm also Retired Navy Reserve; currently in the gray zone waiting for pay to start.

Can't help you with your snowbird question, but wanted to welcome a fellow Sailor.

 

[MooreBonds]

I have questions about state residency/tax requirements.

There may be finer details/points that each state has to determine 'official' residency...but typically, a good rule of thumb that the gov't (Federal/States) normally use is whichever address you are registered to vote at, and which address you have your official documents sent to (Federal income tax returns, bank statements, investment records, etc.). Normally, these are the same location.

IMO, it might be causing more red flags to raise up if you have a different state of residence than your wife...but that's just coming from a single guy who hasn't looked deeply into multi-state residencies.

 

[Rambler]

Bill, be careful with Utah taxes. A former employee of mine (while living and working in Japan) told me that because he owned a home in Utah and left it open for his use when he was on vacation, that he was considered a resident of the state for tax purposes. Never mind that he was paying the Japanese equivalent of fed and state income tax in Japan, and never mind the fact that he was there twice a year, for only two weeks at a time.

I suggest you talk to a tax advisor in Utah, and one in AZ, just to be sure.

R

 

[pb4uski]

It is possible to file a joint federal return but have separate residencies for state tax purposes, but it gets tricky and has higher risk of challenge by state tax authorities.

Before doing anything you should construct a "typical" year and do state returns as both AZ residents and with you as a UT resident and DW as an AZ resident to see if it is even worth it to begin with. I recently did a similar analysis for my Mom and you also need to consider things like potential effects of homestead exemptions for property taxes, second order effects of property taxes on federal tax deductions, etc.

While it is possible to have split residencies for a couple, it requires more attention to detail. If the numbers suggest it is worth it then you need to consider what needs to be done to establish residency and risk. Usually if this is examined they will look at where you spend your time, where you vote, have your drivers license and other licenses, vehicles are registered, etc.

Good luck.

 

[MichaelB]

Welcome to the forum, Bill55AZ. Here is a recent thread on different state residency for husband and wife, but it probably won't be much help. http://www.early-retirement.org/forums/f28/residency-question-59273.html. You may need the assistance of a tax expert, and that might cost much of your avoided tax. +1@pb4uski's suggestion to do a full tax estimate for each state and see if the potential for saving is worth the effort and risk.

 

[ronocnikral]

Welcome Bill from wonderful Davis County, Utah (and Chandler AZ high school grad). Logan is beautiful, and you are lucky to live in such a wonderful place (although I can't say that about traffic along main street there).

Utah is very tricky when it comes to part year residents/non-residents living and working in or outside of Utah. I have filed as one or the other the last 3 out of 4 years and just finished up an audit on my 2009 part year resident return. They got me for a small (less than $100 with back taxes and penalty) error, but they were really looking to prove I had never really left the state and bring in almost 2 years of income under their grasp.

Basically, if you maintain a home and intend to ever return to that home, you have to pay taxes in Utah. If you work outside of the state, Utah will credit you the taxes paid in another state. In essence, you are paying the higher of the two one way or another. What is said about the Japan case above is true, and that very country is used as an example within the State of Utah's literature on this very subject.

My CEO brags about working so many days in Texas to dodge Utah taxes, and I have no idea how it works. If the state offered a finder's fee and I could get a shred of evidence, I'd drop the dime on him in NY sec, as I have no idea how he gets away with it. Well, I do actually, accountants and lawyers are more bountiful than a very skeleton technical staff, so that should answer your question. But, the Utah website is very clear on this topic. Nonresidents and Part-Year Residents

I haven't researched this in depth, but I don't know how you would file Jointly on a Fed return and then file separately on Utah state return. Utah bases it's taxable amount from your Fed AGI. So, I don't know how that would be divided up. That isn't to say it can't be done. And, I don't really know the advantage doing so since most the AGI will be brought in by your wife and very little contributed from you (as I understand your situation). The tax rate is such, you wouldn't benefit from changing up your filing status.

Good luck and welcome!

 

[haha]

How about selling out in Utah, and buying or renting a place in the AZ mountains for the hot months? I assume that having an escape from AZ summer heat is why you maintain the Utah place?

Ha

 

[jerome len]

If you own a home in Utah, asthe rules are in most other States, have paid income taxes in Utah, you'll have a hard time claiming residency elsewhere unless you sell your home. They'll fight hard, especially if you still use the home on a part time basis.

I went through this in another State and had to sell my home before they let me go. Be sure to have it filed by a CPA who knows what he/she is doing so they can represent you....and get ready for an audit. It will happen.

 

[obgyn65]

Welcome, Bill.