Moving Out of New York? The Tax Implications Are Complicated
Thousands of high-income New Yorkers move to Florida or Texas every year to escape state taxes. But New York aggressively audits these moves. Here is what you need to know.
Disclaimer: This article is for general informational purposes only and does not constitute professional tax or legal advice. Tax laws change frequently and vary by individual circumstance. Always consult a qualified tax professional before making financial decisions.
New York State loses billions in tax revenue every year to residents who move to no-income-tax states like Florida and Texas. As a result, New York has become one of the most aggressive states in the country at auditing taxpayers who claim to have moved away.
The Domicile Change Process
To stop being taxed as a New York resident, you must change your domicile — your permanent home. This requires genuine intent to make a new state your permanent home, not just a secondary residence. Courts look at five primary factors: home, active business, time, near and dear items, and family connections.
The 183-Day Statutory Residency Rule
Even if you successfully change your domicile to Florida, New York can still tax you as a statutory resident if you maintain a permanent place of abode in New York and spend more than 183 days in the state. Keeping your NYC apartment while spending time there is extremely risky.
What New York Looks For in an Audit
New York residency auditors are sophisticated. They examine cellphone records, credit card transactions, social media posts, E-ZPass records, and any other data that shows where you actually spent your time. You must be able to prove you spent 183 or fewer days in New York.
Steps to Successfully Change Domicile
To successfully change your domicile from New York, you should sell or cease using your NYC residence, obtain a driver license and voter registration in the new state, open local bank accounts and establish new medical and professional relationships in the new state, move your most cherished possessions, and maintain a detailed contemporaneous log of your whereabouts.
Part-Year Resident Filing
In the year you move, you file as a part-year resident of New York. You pay New York tax on income earned during the period you were a resident and on New York source income earned after you moved.
The Telecommuting Tax Trap
Remote workers employed by New York companies face a particular trap. New York taxes income earned by nonresidents for work performed for a New York employer even from out of state, unless the employer requires the employee to work from another location for the employer's convenience.
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