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Saying Goodbye to New England Winters? Potential Consequences of Changing Your Tax Home

November 03, 2014

Planning tips and risks associated with changing your tax home.

Was 2014 the year you left behind cold winters and moved to Florida? Are you thinking of making such a move in 2015? The tax consequences, and associated tax risks, of such a change can be substantial. Thoughtful planning and great attention to detail is required to successfully change your tax home.

Many taxpayers assume if they spend more than 183 days a year in Florida they will have established Florida as their tax home. But in fact where you spend your days is just one of the many factors that determine which state is your home for tax filings. Two steps are required to affect a change in filing status. First, you must abandon your current domicile. Then a new domicile must be adopted in another state. Both steps are equally important, although taxpayers often make the mistake of only documenting their intent to establish a new domicile.

As we approach year end, now is the time to examine all of the facts that relate to a possible change of domicile. You need to consider whether in fact you have changed the center of your social, business and personal life to the state where you intend to claim as your home state for tax filings. A tax audit will address this question in excruciating detail, so you need to have strong facts to support your position. Our experience shows that states are aggressively selecting taxpayers for audit in the year they change their filing status.

Even if you establish a change of domicile to Florida, Massachusetts and Rhode Island have provisions that can tax you as a “statutory resident”. If you spend more than 183 days in either state and maintain an interest in a home in that state you will be required to file as a resident of Massachusetts or Rhode Island. The fact that you changed your domicile to Florida will not overcome the “statutory resident” status.

For questions concerning matters of changing domicile or if you are wondering what tax implications your move will have, contact us to discuss your tax options before year end.

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