Claiming Florida as Your Official State of Residence as a Way of Saving on Taxes
People who live in high tax states and have a second home in Florida (which has no state income tax) may be able to attain permanent residency status in the Sunshine State under certain conditions, and in the process, save substantial sums on taxes. Compared to states like New York, which has a state income tax rate of 8.92%, and California with a top state marginal tax rate of a whopping 13.3%, a change of domicile to a state like Florida would make sound economic sense.
But increasingly, states with high taxes rates are becoming stricter in terms of the proof they demand from people they consider to be tax paying residents. In general, a person will need to prove that he indeed plans to make the low tax state his permanent residence. While the easiest way to accomplish this is simply to sell the home up north, many folks want to enjoy the ability to spend time in both homes. For those who want to retain two residences, but desire their official residency to be in a low (or no) tax state like Florida, it is imperative to keep meticulous records which would lend credence to the fact that you plan to officially dwell in your new state. More specifically, it is important to be able to prove (with documentary evidence) that you spend more than half the year in your newly adopted state. Most states abide by this rule as the basis for definitions of residency. Fearful of losing revenue, state tax officials have become stricter of late. Tim Steffen, director of financial planning for Robert W. Baird, advises people to keep a diary of their daily activities attesting to the number of days one stays in the state during the year. In the past plane tickets would often suffice as proof. But this is no longer the case. Terry LaBant, senior strategist at Calamos Wealth Management, informs us that tax auditors may claim that airline tickets merely show where a person was the day he left New York for Florida and the day he returned, but not where he was all the days in between. After all, one can fly from New York to Florida and then a short time after return to their home up north. While this may sound foolish to some, tax officials are aware that some unscrupulous people are tempted to skirt the law, and in the process, save thousands of dollars. Along with a diary, take steps to demonstrate that you are committed to your new state: register to vote, fulfill a jury summons, get a library card, change your driver’s license and car registration. Even joining a gym demonstrates intention. Proof of local health care providers who you regularly see lends credence to your claim. Keeping receipts of ATM withdrawals can be an indicator that you are in the state for at least half the year. In this regard, pay your shopping bills with a credit card and keep the receipts. In sum, keeping careful records to support your claim is the most important key to achieving the goal.