Relocating to a Different State? Here’s What You Need to Know
posted Dec 18, 2017 by Steve M. Fay, CPA, JD, LLM in the Global Tax Blog
Considering a move to a state with lower or no state income tax? Sick of the harsh New England winters? Your move could lower your state tax bill, but to avoid having the old state continue charging you for taxes after you have moved, you will want to establish that your new state is your place of legal residency, or domicile, in other words. Here are some suggestions to help document your domiciling for state purposes.
Establishing domicile: The Basics.
Domicile is no longer a question of, “Where was I for 184 days or more?” Massachusetts focuses on your intent and whether or not you intend to return to Massachusetts. A change in domicile will not be accomplished by a temporary or protracted absence from Massachusetts. A taxpayer must not intend to return. To change domicile, a taxpayer must demonstrate that he has taken affirmative steps consistent with his declaration.
A taxpayer's declaration of his intent will be subject to close scrutiny. This scrutiny, aka a DOR domicile audit, could probably take place years after the relocation. So, it is important to document the change of intent when it happens, do not recreate it when it matters. One who asserts that domicile has changed has the burden of proving that fact. A number of factors will be considered in determining whether a taxpayer has changed his domicile.
Factors to support intent to change domicile include, but are not limited to, the following:
For purposes of this example, let’s say that you have moved to Florida recently from MA.
- File a “Florida Declaration of Domicile.”
- Purchase or lease a new home or an apartment in the Sunshine State. Get insurance for new residence through a Florida insurance agent. A small apartment rented month to month in Boca could undermine a position that there is an intent to change domicile. When you purchase the new home, file a Florida homestead.
- If you want to or need to, obtain employment in the Florida.
- Cancel Massachusetts bank accounts, if any, open new accounts in the new location.
- Sell your home in Massachusetts. If you have a high value home in Massachusetts, and a moderately priced condo in Florida, are you keeping that Massachusetts home just for a few months in the Summer? Could be the case, but Massachusetts may question your intent to return.
- Send address change notices to US Postal service. Document change by making a copy of the form prior to mailing.
- Change voter registration to Florida. Be sure to vote, not by absentee ballot, in Florida. Have your name removed from the Massachusetts voter registration rolls.
- Obtain a driver's license and move and register vehicles to Florida.
- Change membership in temples, churches, golf clubs, health clubs etc.
- Update estate and trust documents, health care proxy, living wills etc., for Florida.
- Open new safe deposit located in new location. Empty your Massachusetts safe deposit box and close it.
- Change professional licenses. Doctor, attorney, CPA, to Florida.
- Change the listed address on your passport to your new address.
- Change credit and brokerage accounts to the new address.
- Go to doctors and dentists in the Florida.
- Maintain detailed daily contemporaneous log of physical presence every day. For Massachusetts domicile, a half day in Massachusetts counts as a whole day. Keep detailed records of travel itineraries.
Again, this is just a list of suggested items that you have to address. The goal is that the paper trail reflects your intent to leave Massachusetts.
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.
Unless you establish domicile in the new state and terminate residency in the old one, you could come under scrutiny by state tax authorities. Our team can assist you with navigating the rules in your old and new states and help you avoid potential pitfalls.