Change residency to second home

[doneat54]

Right now our primary home is in MA, we bought a second home in NH last year. DW is still working in MA, I am FIRE'd. We draw nothing from our investment portfolio right now. In the spring I plan to buy a new 1-3 year old vehicle; ~$25k.


NH has no sales tax on vehicles. NH has no income tax.


Doing some reading, if I am interpreting it right, all I need to establish residency in NH is get a NH driver's license. And all I need to to do that, it show, deed, utility bill, etc. Once I do that, I will have to register my other cars in NH (I's pretty sure).



So $1500+ in vehicle tax savings, plus, after DW retires ('22), we'll pay no state income tax on withdrawls. Plan to sell MA house in '23 anyway and live in NH full time.


I see no reason not to do this. I'm sure the rules are very state specific, but maybe there are folks here in New England who may have made a similar move.



I do think that as long as DW works in MA, she is going to have to pay the MA income tax.


Will keep reading......

 

[DenverGuy42]

one thing to consider is the $250,000 tax deduction ($500,000 for a couple) on the sale of a primary residence. You have to have lived in the house for 2 out of the last 5 years to claim this deduction.

You say you want to sell in 2023. If you "move" to NH in 2021, but for whatever reason your MA house doesn't sell in 2023, you'll have to move back to MA to make up for the number of months you are missing for the two years primary residency. Could be cutting it close if you are putting the house on the market in mid to late 2023 for sure.

 

[OldShooter]

Several threads here already on this. State revenue people are getting very aggressive about this sort of thing and making it not easy. Residency checks for things like where your dentist is, where do you vote, how many days a year do you spend in MA, etc. Check with MA revenue and see how hard they tell you it will be. If your main home is in MA you are probably doomed to pay.

Edit: It didn't take hard searching: https://www.mass.gov/service-details/learn-about-legal-and-residency-status-in-massachusetts

 

[SecondCor521]

one thing to consider is the $250,000 tax deduction ($500,000 for a couple) on the sale of a primary residence. You have to have lived in the house for 2 out of the last 5 years to claim this deduction.

You say you want to sell in 2023. If you "move" to NH in 2021, but for whatever reason your MA house doesn't sell in 2023, you'll have to move back to MA to make up for the number of months you are missing for the two years primary residency. Could be cutting it close if you are putting the house on the market in mid to late 2023 for sure.

It's probably unlikely, but OP may qualify for a partial exclusion of gain depending on facts and circumstances. See Pub 523 for details if interested.

 

[DenverGuy42]

It's probably unlikely, but OP may qualify for a partial exclusion of gain depending on facts and circumstances. See Pub 523 for details if interested.

doubt it. All of the exceptions include the phrase:

"if any of the following events occurred during your time of ownership and residence in the home."

(note: I am not a tax lawyer, but I've had to look into these things as I own three properties and will likely get a fourth - after which we'll sell one or two of the others. Been looking into the ins and outs of this tax deduction)

they will not be in residence at the time of the sale - they are claiming to have moved to NH. Their primary residence for 2021 and 2022 into 2023 will be NH. They are ineligible for partial exclusions unless their primary residence is in MA.

The intent of the partial exclusions is (for example) if you buy a house for a new job - live there a year - and get a new job at least 50 miles further away than your old work location. Then you could claim 50% of the deduction. It couldn't be used if you bought a house - lived there for a year - moved away and lived somewhere else for 3 years.

That and they wouldn't meet the criteria for the partial exclusions in the first place

exclusion 1: Work-Related Move, they are not moving from MA for a new job.

exclusion 2: Health-Related Move, they did not move from MA to NH 3 years ago (in 2023) for health reasons. And even if they did, they would have had to had sold their house in 2021 to claim the partial deduction.

exclusion 3: Unforeseeable Events, in 2023 - they cannot claimed they moved from MA to NH because of an unforeseen event (and just like above, they would have had to of sold the MA house in 2021)

 

[pb4uski]

We went through this this year... changing residence from Vermont (income tax state) to Florida (no income tax state).

There is more to it than just registering your car in NH and getting a NH driver's license. The concern isn't so much having NH take you as a resident but creating facts and circumstances that MA accepts that you are no longer a MA resident. You want a result that you are both NH residents but your DW works in MA and as a result you will be a MA non-resident return for her MA earnings.

Since we kept our summer home in Vermont we were careful to change everything possible to avoid Vermont claiming that we were still Vermont residents.

• Registered to vote in Florida
• Changed drivers liceneses to Florida
• Changed car insurance and car registration to Florida
• Changed bank accounts to Florida
• Direct deposits of pension/SS to Florida checking account
• Dividends changed to go to Florida checking account
• Changed addresses on all financial and credit card accounts to Florida
• Changed autopays to Florida checking account
• Changed Medigap and Part D to Florida
• Notified our town clerk that we were no longer Vermont residents and to take us off voter list
• Claimed Florida as our homestead
• Announced change in our 2020 Hoilday letter including Florida mailing address
• Will use Florida address for 2020 U.S. Tax Return
• Will file part-year resident tax return for Vermont

We also keep track of the number of nights that we spend in Vermont and are careful to spend less than 183 nights a year in Vermont... at least for the next couple years.

We still have a summer home in Vermont and will spend a little less than half the year there. We'll continue to have a truck that stays up there registered and insured there as well as a boat, jet-ski and a couple trailers for them. We do have bank accounts up there but with negligible balances... will probably kill them off soon.

ETA: Our Vermont home is worth about what we have invested in it so preserving the principal residence gain exception wasn't an issue in our case.

 

[bada bing]

If you just want to save the sales tax on the car registration, I don't think you have to change residency. It is perfectly legal to own a car registered in a state other than your residence, especially if you have an address the car is attached to. I am a resident of Alaska and own a second home in Arizona. I have 2 cars in Arizona, registered there at my Arizona address. Local taxes prevail on the real estate and vehicles in the respective states and I pay no state income tax as a resident of Alaska.

Maybe you can wait to change residency until your done earning money in MA ?

 

[doneat54]

All good tips, thanks. Yes, the near term objective is to save the sales tax on a new vehicle next spring. Longer term goal would be to avoid MA income tax on portfolio withdrawls when DW retires in '22. That will give us 1.5 years to make moves like getting DL's in NH, change voter registrations, etc. Worst case we pay income tax on it until '23 when we sell MA home.


Good point about gain exemption on primary residence. While we have a lot of equity in that home, we don't anticipate collecting a big gain on it, but will have to keep it in mind.

As for the days spent, I think we'll get a paper calendar for 2021 and hang it in the kitchen and can mark days spent there on it to keep track.

 

[pb4uski]

... As for the days spent, I think we'll get a paper calendar for 2021 and hang it in the kitchen and can mark days spent there on it to keep track.

A nit, but I think it is typically measured by where you spend the night rather than days.

I recall a boss who was a Texas resident but worked in NYC who would try to fly in on Monday mornings rather than Sunday nights and fly out after work on Fridays rather than Saturday mornings to reduce his number of NYC days.

 

[doneat54]

A nit, but I think it is typically measured by where you spend the night rather than days.

Good to know, thanks. We are seldom here during any day where we are not spending the ensuing night.

 

[doneat54]

Well step one done. NH Driver's License acquired today. Makes the fourth state I have been licensed in, SC, FL, MA and now NH.