Changing Domicile and Residence from New York to Florida

Domicile and “Statutory Residence” for Income Tax Purposes

Domicile is a technical legal term. While residence requires physical presence in a state, domicile requires physical presence plus the intent to make that state your fixed or permanent home.

Domicile is the place you regard as your permanent home – the place to which you intend to return after a period of absence.

You can have only one domicile. Once established, your domicile continues until you move to a new location with the intent to establish your permanent home there and to abandon your original domicile. Moving to a new location, even for an extended period of time, does not change your domicile if you intend to return to your original domicile.

Thus, if you are domiciled in New York, you are a resident for income tax purposes, and all of your income, regardless of its source, will be taxable.

Even if you are successful in changing your domicile to Florida, if you return to New York for more than 183 days during the calendar year and maintain a home in New York, you will be classified as a “statutory resident” under New York tax law. Like resident taxpayers, “statutory residents” are subject to state income tax on all of their income, regardless of its source.

If you maintain a home in New York, but report that you are a nonresident for income tax purposes, it is important to keep a log of the dates that you are visiting New York. If you are audited, you will be asked to produce records to show the specific days that you were in (or out) of New York. Tax auditors may seek cell phone bills, credit card statements, bank statements, airline tickets and E-Z Pass records to confirm the accuracy of your claims. Partial days count as full days for New York income tax purposes.

While spending 183 or fewer days in New York will prevent you from paying income tax as a statutory resident (assuming you are not domiciled in New York), the amount of time you actually spend in Florida is also important. It is important that you actually spend more time in Florida than you do in New York. For example, if you spend five months in New York, three months in Florida, and four months in a third jurisdiction, New York may assert that you did not abandon your domicile in New York.

Maintaining a Home in New York

Maintaining a second home in New York will not automatically classify you as a New York resident taxpayer. It depends on your use of the New York residence relative to your use of the Florida residence and your ability to document your community ties to Florida.

The value of your Florida home should be significantly greater than the value of your New York home. Your Florida residence must be used as your primary home (not your vacation home) and you must be able to document this use. 
If you retain a home in New York, it is especially important to:

• Take all affirmative steps to establish your new Florida domicile;
• Not claim a homestead rebate for your New York residence after moving;
• Keep records of days spent in each state;
• The residence in New York should be much smaller and require less maintenance; and 
• Move items of sentimental value to the Florida home. If any of these items have high monetary value insurance records should reflect their Florida location.
   

As discussed above, the concepts of domicile and statutory residence are distinct for income tax purposes. If you maintain a second home in New York, you must satisfy two tests. First, you have to demonstrate that you are not domiciled in New York, and second, if you are not domiciled in New York that you did not permanently maintain a home there and spend more than 183 days there.​

Relevant factors in determining domicile include:

​The address you receive bank and brokerage statements, bills, and general correspondence.

1. The physical location of a safe deposit box you use to store valuables.
2. Location of auto, boat and airplane registrations.
3. Location of your personal driver’s license.
4. Where you are registered to vote. (And, vote often… even off-year elections).
5. Where you file for homestead exemptions.
6. Club memberships.
7. Nature of telephone, cable and utility services at each residence and the activity at the location.
8. The reference in wills, trusts and other legal documents that a particular location is your place of domicile.
9. Your active involvement in organizations, particularly where physical presence is involved.

What does it mean to be a “resident” for estate tax purposes?

For purposes of New York state estate tax, residence and domicile are interchangeable terms. (Note the difference from the concept of residence for income tax purposes, which is based on a domicile or “statutory residence” test).

Domicile for estate tax purposes means the place where a person has his or her permanent home. It requires both physical presence and the intent to have one’s domicile in that state, and may be established as soon as both physical presence and the intention to create a domicile are present. This test is similar to the domicile definition for income tax purposes.

The major difference is that, for income tax purposes, a taxpayer who changed his or her domicile to Florida can still be deemed to be a statutory resident of New York if he or she maintained a home and spent more than 183 days in New York State. 

New York State Estate Tax

New York imposes a state estate tax upon the estate of every resident decedent who has an estate valued greater than $5,250,000 effective through December 31, 2018. Starting January 1, 2019 the New York estate tax exemption will be $5.49 million (plus as indexed for inflation).

Portability Note: In 2013 federal legislation made the “portability election” permanent. The portability election refers to the ability of a surviving spouse to elect to use his or her deceased spouse’s unused federal applicable exemption amount. For example, if a spouse passes away with no assets in his or her name, the surviving spouse may make a portability election and as a result would have the ability to use his or her own federal exemption amount plus his or her spouse’s unused federal exemption amount.

New York has not adopted the concept of portability thus, if a deceased spouse has not completely used his or her New York exemption amount, the amount not used is lost and may not be used by the surviving spouse. Therefore the inability to use the portability election presents a potential estate tax issue for New York residents.

New York State Nonresident Estate Tax

For nonresidents, New York imposes an estate tax on real property or tangible personal property located within New York. Thus, if you own real estate or tangible personal property located within New York, even if you successfully change your domicile to Florida, you may still be subject to New York estate taxes.

Different Domiciles for Spouses

While there is a New York tax regulation that states that generally the domicile of a husband and a wife are the same unless they are in fact separated, New York specifically permit a husband and wife to file separate state tax returns if one is a resident and one is a nonresident. The practical effect of filing separate returns is that the nonresident spouse’s non-New York source income will not be taxed in New York.

Different domiciles for spouses impact the amount of capital gain that can be excluded from the sale of a principal residence.  In order to exclude $500,000 of gain, while either spouse may be the owner of the primary residence, both spouses must meet the test of using the home as a primary residence for two of the past five years.  Caution: The Florida spouse must be able to win the domicile argument if audited. 

Things to do when you are ready to establish Florida as your domicile:

1. File a Florida Declaration of Domicile in the office of the clerk of the circuit court for the county in Florida in which you reside. In the event you maintain a home in New York, the sworn statement includes a declaration that your Florida home is your principal and predominant home, and that you intend to continue it permanently as such. (I can provide you with the form used for this purpose.)
2. File an application for a homestead exemption on your Florida residence.
3. Execute estate planning documents that reflect Florida as your place of residence.
4. Transfer title to your automobiles.
5. Obtain a Florida driver’s license.
6. Change your passport address.
7. Execute a post office change of address.
8. Register to vote. And vote every opportunity you can… even off-year elections.
9. Update official records (professional licenses, social security records, state licenses).
10. Update all financial records (all financial accounts (bank, brokerage, checking etc.), credit cards, loans payable and loans receivable)
11. Update membership records (political party, private clubs, alumni directory listings, charitable organizations, airline miles cards, religious organizations, etc.).
12. Update employment records.
13. Update medical and pharmacy records.
14. Update all insurance records and premium notices (life, health, disability, medical, property & casualty, umbrella) and be sure that all subsequent personal applications for (life, health, disability, medical, property & casualty, umbrella) are on forms the provider/issuer requires of Florida residents.
15. Update utility records (cable, internet, electric, ISP, telephone, cellphone, etc.).
16.  Update residential leases.
17.  Anything else that evidences your bona fide intention to change your domicile from New York to Florida.