Factors to Help You Prove Your Domicile
NOTE: Tax laws change periodically, and you should consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and is not a substitute for tax advice.
It’s time for the snowbirds to think about their migration back North. Many folks make a great deal out of staying for exactly 6 months and a day. They think that being in a state for more than half the year makes them domiciled in the state.
Maybe yes, but maybe no, It all depends on meeting certain criteria.
Domicile is "the place where a man has his true, fixed and permanent home and principal establishment, to which whenever he is absent he has the intention of returning." A person can have only one domicile at a time no matter how many residences he owns.
Once a person acquires a domicile, s/he retains that domicile until another domicile is acquired. A change of domicile requires:
- abandonment of a prior domicile
- physically moving to and residing in the new locality
- intent to remain in the new locality permanently or indefinitely
If a person moves to a new location but intends to stay there only a limited time (no matter how long), his domicile does not change.
Your state of domicile determines:
- to which state you pay state income taxes
- where a decedent's will is probated and where their estate will be administered
- to which state your estate pays inheritance and estate taxes
- which state’s laws govern the enforcement of judicial orders
Since domicile depends on where you intend to return, it is a subjective concept. Nevertheless, many objective actions can give indications of your intention. The following is a list of actions that give evidence of intention to change your domicile.
You don’t have to do everything on the list. None of these things, except the requirement for physical presence in the new domicile, are absolute requirements. However, you have to do enough of them, especially the more significant ones, to convince the tax authorities that you have truly moved your domicile.
- Buy or lease property in the new domicile state, furnish it as a permanent residence, not a vacation place.
- Stay more than 183 days per year in the new state - this is the most important requirement. In some states, this is an ironclad rule for tax purposes. For example, if you maintain a residence in New York and spend more than 183 days per year there, New York considers you a resident for tax purposes regardless of your intentions.
- Obtain a driver’s license in the new state.
- Register your cars in the new state.
- Register to vote in the new state, and vote.
- Go to doctors, dentists, lawyers and other professionals in the new state and have your records moved from the old state to professionals in the new state.
- File your federal income tax return with the appropriate IRS service center and show your new state as your address.
- File a Declaration of Domicile if your new state has such a procedure.
- Move bank accounts and safe deposit boxes to the new state.
- Send notifications of a change of address to family, friends, business associates, professional organizations, credit card companies, brokers, and insurance companies
- Use the new state as a home base. When you travel, leave from and return to the new state.
- Keep your family heirlooms, furniture and keepsakes in the new state. Failure to move items with strong sentimental value, such as the family picture albums, away from the old state shows a lack of intent to change domicile.
- Change legal documents to reflect residency in the new state.
- Change the listed address on your passport to your new state of residence.
- Update your estate plan and have your estate planning documents identify you as a resident of the new state.
- Join organizations such as clubs, religious groups and become active with local charities in the new state.
- Apply for a homestead in the new state if applicable.
- If possible, arrange for family gatherings in the new state instead of the old state.
- Subscribe to local newspapers in the new state and cancel subscriptions in the old state.
- Keep a calendar so you can show when you were in the new state each year.
- Keep in mind that phone bills, utility bills, and credit card bills all can provide evidence of where you were living.
Not only must you adopt a new domicile, but your old domicile must be abandoned. In your former state of domicile:
- Have your name removed from the voter registration list.
- Turn in your driver’s license.
- Pay income tax as a non-resident if applicable.
- Mark your last state income tax return “FINAL” and use the new state’s address.
- Spend as little time in the old state as possible.
- Close accounts in the old state.
- Change all club membership, religious and social affiliations to “non-resident” status.
Be consistent. If you want to be a Floridian to escape Pennsylvania income tax, don’t register your car in Pennsylvania to get lower insurance rates. Use common sense. Does your neighbor who has lived in Florida all her life have her car registered in Pennsylvania? Of course not. Does she belong to a church or synagogue in Pennsylvania? No. Just imagine yourself explaining that to a tax auditor.