State Residency and Taxes???

[Orchidflower]

Hypothetical:

You live in Michigan for most of the time, and own a condo in Ann Arbor.
You claim Florida as your home State for taxes, but you do not own any home or rent any apartment there. You do have a mailing address there, tho, which is probably a mail forwarding service like UPS with a street address.

What is the number of days you must stay in Florida required by the IRS to claim Florida as your home state?
Many RV'ers perpetually travel, but claim Florida as their home State for tax purposes. How does this not red flag you to the IRS?
The last thing anyone wants is the IRS busting into your home in Ann Arbor, Michigan, to pull out your cell phone, utility and other documents to verify which State you are spending your time primarily in.

Any real world experience with this? Or any IRS people, CPA or others who know the laws here on claiming State residency?

 

[roadkill]

The IRS is not a consideration in your example. Residency for tax purposes is defined by each state. Some high tax states such as New York, make it difficult to change residency. There is typically an extensive check list of items that the state considers when you claim a change of residence. Amount of time in the state is one. But there are others such as do you continue to own property? Do you have any financial or business connections in the state, etc, etc? I suggest that you research Michigan requirements in this regard. Hope this helps.

 

[Martha]

A number of states have lists of factors they look at to determine residency. In my state, as in many, if you are in the state or traveling to the state an aggregate of 6 months in a year, you are a resident

Things are more flexible if you spend less than 6 months in any one state.

As roadkill suggests, look at Michigan requirements--it may still be entitled to claim you as a resident.

 

[Orchidflower]

First, I just gave Michigan as a hypothetical example as I am not thinking of moving there. But I see over and over on boards that RV'ers talk about claiming some State as residency while they travel all over 12 months a year.
I was just curious as to how this works, and you are helping alot.

 

[brewer12345]

And you also have to be careful or you can have more than one state claiming you as a resident and taxing you as such.

For years, I have lived in one state and worked in one or two others, so I get whacked by two or three states every year.

 

[REWahoo]

I see over and over on boards that RV'ers talk about claiming some State as residency while they travel all over 12 months a year.
I was just curious as to how this works, and you are helping alot.

Here is a link that might help explain how it works with regard to Texas:
Escapees RV Club

 

[retire@40]

And you also have to be careful or you can have more than one state claiming you as a resident and taxing you as such.

For years, I have lived in one state and worked in one or two others, so I get whacked by two or three states every year.

But you get a credit in your resident state for the tax you pay to the nonresident states.

 

[roadkill]

But you get a credit in your resident state for the tax you pay to the nonresident states.

This is true, however, there may be limitations. For example, if one lives in Pennsylvania and works in New York state, PA will give you a credit equal to what you would have otherwise paid to PA assuming you were a PA resident and earned the salary in PA. Since the top New York marginal rate is around 7.85% and PA has a flat rate of around 3%, a PA resident would receive a PA credit of 3% applied to the income that was also subject to New York tax. You would still pay the full New York tax to New York. All unearned income would only be subject to the 3% PA tax. The PA taxpayer has to file a Federal, New York, and PA return. I think at this point, Turbo Tax enters the scene.

 

[youbet]

While minimizing taxes is certainly an important consideration, state provided benefits shouldn't be overlooked. If you needed hospitalization through a state high risk pool, or needed long term care through state medicaid, which state would you rather be in?

 

[RunningBum]

I have homes in Virginia and Texas. Texas has been my residency. I spent more than half the year there, and have my voters reg, drivers licence and everything else there, except for one car I keep garaged in VA so I had to license it there. I had never had residency in VA so I've

One year I got a tax bill from VA. They claimed I filed a federal tax return from a VA address, which was a lie. I filed electonically and listed my Texas address. I think they got it from either my house property taxes or car registration. I filled out a form to contest the bill, explaining that it was a vacation home. I was ready to show them all of my proof of Texas residency if needed. I've heard that they might want to see credit card bills, and even proof of seeing doctors in the other state, things that actually show you were physically there. I heard this from a friend who wanted to establish a residency in one of those tax-free states and asked a lawyer how to do it legitimately. BTW, VA never asked me for any followup. Remember it's not the IRS, but the state revenue dept that cares about your state income taxes.

In the hypothetical question, if the only property you own is in Michigan, it may be tough to support your case if they dig very deep. Tax fraud doesn't seem worth the risk for the money. The more money involved, the more likely they are to dig, I would guess. And if you once paid taxes in Michigan, it seems like it's tougher to escape because they'd more likely want proof that you really moved. On the other hand, lots of people probably move to another state, and turn their old house into a rental, and probably never get hassled.

This year I'm switching residency to Virginia because my daughter wants to go to college there. The tuition vs. tax cost is more or less a wash, but she should be in the resident pool for admission purposes, and I think she'll need that help. I hope it works out.

 

[OAG]

I have homes in Virginia and Texas. Texas has been my residency. I spent more than half the year there, and have my voters reg, drivers licence and everything else there, except for one car I keep garaged in VA so I had to license it there. I had never had residency in VA so I've

One year I got a tax bill from VA. They claimed I filed a federal tax return from a VA address, which was a lie. I filed electonically and listed my Texas address. I think they got it from either my house property taxes or car registration. I filled out a form to contest the bill, explaining that it was a vacation home. I was ready to show them all of my proof of Texas residency if needed. I've heard that they might want to see credit card bills, and even proof of seeing doctors in the other state, things that actually show you were physically there. I heard this from a friend who wanted to establish a residency in one of those tax-free states and asked a lawyer how to do it legitimately. BTW, VA never asked me for any followup. Remember it's not the IRS, but the state revenue dept that cares about your state income taxes.

In the hypothetical question, if the only property you own is in Michigan, it may be tough to support your case if they dig very deep. Tax fraud doesn't seem worth the risk for the money. The more money involved, the more likely they are to dig, I would guess. And if you once paid taxes in Michigan, it seems like it's tougher to escape because they'd more likely want proof that you really moved. On the other hand, lots of people probably move to another state, and turn their old house into a rental, and probably never get hassled.

This year I'm switching residency to Virginia because my daughter wants to go to college there. The tuition vs. tax cost is more or less a wash, but she should be in the resident pool for admission purposes, and I think she'll need that help. I hope it works out.

My Son who is on AD with the Military recently changed his HOR from Florida to Virginia for the express purpose of sending the kids to VA Colleges. He was told there would be a one year wait for the residency to take effect for in-state tuition purposes. As it turned out they did not make him wait the full year and his oldest Son got in-state rates a few months earlier. Not sure if it was because of the AD Military status or if VA grants it early routinely.

 

[RunningBum]

My Son who is on AD with the Military recently changed his HOR from Florida to Virginia for the express purpose of sending the kids to VA Colleges. He was told there would be a one year wait for the residency to take effect for in-state tuition purposes. As it turned out they did not make him wait the full year and his oldest Son got in-state rates a few months earlier. Not sure if it was because of the AD Military status or if VA grants it early routinely.

She's just starting her senior year of high school so I'm starting the one year right now.

 

[mathjak107]

dont even think of fudging the amount of time spent in a state so you can fanagle a residency for tax purposes,

ezee pass, toll recepits, cell phone and charge card records will make it real easy for a state audit to nab you

 

[Orchidflower]

You all have given me much assistance, thanks!
I always wonder how people pull this off, because I know they can check cell phones, utility bills and so forth; but I know RV'ers do it all the time. They perpetually travel, so how are they NOT red flagged is my question.

And, insofar as Medicare/Medicaid, I hadn't even considered them. You are so right...pick the best State for benefits. I'm holding out on collecting the Social Security benefits until 70, because I am intending to live until I am 90. I hope.

 

[Bikerdude]

A friend has claimed FL as his residence for tax purposes and he stays in an RV park there in the winter. He owns a home in CT. He must spend 6 mos. and a day not in CT to be legal. The six months and a day can be spent anywhere as long as it's not CT. So trips to Europe and vacations in other States count as time not in CT.

I think this is how the RVer's do it.

 

[audreyh1]

How do RVer's do it?

Some states do not have a requirement of X days per year residence. TX is one of these, I believe. South Dakota another.

There is also the fact that you maintain your current state residency until you take actions that make you a resident of another state. So once a perpetual traveler establishes residency somewhere, he can go travel to his heart's content.

Actions that declare intent to reside in a given state are things like:
driver's licenses
voter registration (a biggie!)
vehicle registration and licensing
address for purposes of: insurance, filing taxes, etc.

You had better all have these in the same state if you are a perpetual traveler, otherwise you can get into trouble.

You are required to have a permanent "physical address", but this does not require that you be physically present at that address for any given amount of time in some states.

Audrey

 

[Orchidflower]

I will check out Texas and South Dakota. Does anyone know any other States or a website that is easy to check this out?
Y'all are sure helpful.

 

[A854321]

www.retirementliving.com

This has a comprehensive list of state taxes. It doesn't really rank states as to their "tax-i-ness". I think that all depends on your particular status.

ww.retirementliving.com

 

[A854321]

Interesting comparison

Which states give retirees the best deal? - MSN Money

This might be a more realistic scenario to follow.

 

[A854321]

Their advice

The above article comments that it is the property tax that makes more impact in tax liability than the state income tax. Clearly, chosing to live in an expensive home in a region with high overall home prices, high property tax, and high state income tax is a triple loser.

It all comes back to LBYM, doesn't it?

 

[Orchidflower]

As A854321 posted, the State's that supposedly give retirees the best deal makes it look like Delaware was a winner. THEN I found out I would be taxed on interest and dividends at the 5.95% rate and capital gains, also. Boo hiss! I think that can be beat.

 

[teejayevans]

Which states give retirees the best deal? - MSN Money
This might be a more realistic scenario to follow.

Or not....for example, Raleigh, NC
The property taxes should have been 2078, PLUS
they ignored personal property taxes for NC, so I guess they
assume you don't have a car? Add $200 for your late model
honda...oh, you have two cars, and a boat....cha-ching!

TJ

 

[haha]

How do RVer's do it?

You are required to have a permanent "physical address", but this does not require that you be physically present at that address for any given amount of time in some states.

Audrey

What is a "permanent physical address in this case"? Does this mean that even if you are moving around in a $250,000 motorhome that you have to rent or buy an inhabitable place in your home state?

How about a camping club membership taken out in your home state?

Ha

 

[A854321]

Driver's license

Doesn't your driver's license address define your home address for legal purposes?

 

[Martha]

What is a "permanent physical address in this case"? Does this mean that even if you are moving around in a $250,000 motorhome that you have to rent or buy an inhabitable place in your home state?

How about a camping club membership taken out in your home state?

Ha

You just need a street address. Many mail forwarding companies will provide such an address for you. That is fine--at least with South Dakota.

The big problem isn't so much establishing residency in a new state, it is terminating residency in your old state and not accidentally becoming a resident of a state by spending too much time in that state. So, to terminate make sure you get a address, even if through a mail forwarding service in the new state, you register to vote in the new state, you register your vehicles in the new state, you get your driver's license in the new state, and you don't take advantage of state resident benefits such as resident fishing licenses in your old state. And then don't spend 6 months or more in your old state or in any state that you don't want to be a resident of.