The Taxing Life of a New York Snowbird



 

There is much in Florida and other sunbelt states to attract retirees from Western New York, especially during winters characterized by arctic temperatures, snow, and salted roads. Bring on the sun, sand, and surf!
Depending on the state, you could also add to the list low or no income tax or inheritance taxes.

If you spend much of your time snowbirding, ridding yourself of New York’s notoriously high taxes may have crossed your mind more than once. Recent tax law changes limiting New York taxpayers’ ability to deduct state and local taxes on federal tax returns may also be a catalyst to entertaining a move.

Be careful and do your homework. If your design is to snowbird for the tax savings, the planning you do (or don’t do) can have a significant impact on your personal wealth.

 

Residence vs. domicile

You can have many residences, but for the purposes of tax liability, the property you call “home” or your domicile is vitally important. With very few exceptions, wherever your domicile is, you’d be required to pay appropriate state taxes. That could have a real impact on your personal bottom line because, if you’re a tax resident of New York, the state will tax you on all income sources. On the other hand, if you‘re a non-resident, the state will only tax you on income from New York sources.

You may purchase a second place to live in Florida, but that does not necessarily mean it’s automatically your “home.” If audited, you have the burden of proof to show that you’re no longer a domiciliary of New York State. The more things that you can do to show that you have severed your ties to the Empire state, the better the case you can make to a suspicious tax auditor.

Chris Doyle is a partner at the law firm Hodgson Russ LLP, and head of its state and local tax practice group. He says the firm advises all their clients to take care of the “ministerial” items.

“Become a non-resident member of your club, establish ties with clubs in Florida, change your voting registration, change your driver’s license, and get rid of your STAR exemption because your house in New York is no longer your principal residence,” he says.

While not taking care of these things may demonstrate that you haven’t fully cut ties with the state, forgetting to do one will not be fatal. The pattern of your typical day, week, or month is important, too.

“We do recommend that people keep a daily diary of their whereabouts, copies of their credit card receipts…We encourage our clients to keep copies of their frequent flyer records and receipts for travel so that, should New York come calling, they’ve got a paper trail that shows clearly where they’ve been and what they’ve been doing,” Doyle adds.

Even if your “home” or domicile may be in a state such as Florida, if you also have a place in New York to live year round and spend a lot of time here (specifically 183 days or more), that will make you a resident by law and subject to taxes. Again, that’s where records can come in handy to prove or disprove how many days you actually were in New York.

 

Making the decision

Some may consider these requirements onerous. Keeping track of whereabouts,  maintaining records, the concern or expense of dealing with a potential audit, or not having the freedom to come and go as they please is enough to put people off the idea of snowbirding. For others, expenses in their new home state might undercut the cost savings that come from being a domiciliary in a no- or low-tax state.

That said, some folks are willing to endure what comes with this move because of a significant savings in taxes, inheritance, or charitable considerations.

Just as everyone’s situations are different, so, too, are their solutions.

“It’s not a one dimensional decision. They need to be cognizant of the dimensions and have the patience to explore all of them before leaping,“ says Tony Ogorek, president and founder of Ogorek Wealth Management, LLC in Williamsville. He counsels that people considering such an action rely on advice of a tax attorney who specializes in this area instead of friends or relatives.

Other goals and lifestyle choices for this phase of life play into determining whether you should even have a second residence. Adding to the cost and worries, it may prevent you from doing things that you want to do. For example, the expense of maintaining dual residences in a snowbirding situation may offset the opportunity to travel to other places around the world.

Ogorek suggests that people in this phase of their lives consider that their biggest asset is not money but time and the ability to control it.

“There may be a material impact in terms of how you can spend your time and where you can spend your time; that’s a trade off,” he says. “You need to know what that trade off is and weigh that against the economics of the decision.”

 

Gabe DiMaio is a frequent contributor to Forever Young and Buffalo Spree.

 

 

 

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