Moving to Florida or another lower-tax state can save a New Yorker significant income tax, but only if New York agrees that you’ve actually left. The state actively audits people who report a move, especially higher earners, and the burden of proof is on the taxpayer. Here is how New York decides, and how to prepare.
Two ways to be a New York resident
New York can tax you as a resident, on all of your income, under either of two tests:
- Domicile. Your domicile is your permanent home, the place you intend to return to. It continues until you abandon it and establish a new one, and you must prove the change by clear and convincing evidence.
- Statutory residency. Even if your domicile is elsewhere, you are a resident for the year if you maintain a permanent place of abode in New York for substantially all of the year and spend more than 183 days in the state. Any part of a day in New York generally counts as a full day.
New York City applies the same tests for its resident income tax.
What auditors look at
To decide whether your domicile has really changed, auditors compare your ties to New York with your ties to the new state, using five primary factors:
- Home: the size, value and use of your homes in each state, and whether you kept your New York residence.
- Active business involvement: whether you still run or work in a New York business.
- Time: where you actually spend your days.
- Items “near and dear”: where you keep things of sentimental or significant value, such as heirlooms, art, collections and pets.
- Family: where your spouse and minor children live and where the children attend school.
A new driver’s license, voter registration and a declaration of domicile help, but they carry less weight than how you actually live.
Keep proof of your days
In a residency audit you must show where you were on each day. Auditors review credit card statements, phone records, E-ZPass and travel records. Keep a calendar, along with documents that support it. Days you can’t document may be counted against you.
The year you move
In the year of the move you file as a part-year resident. Income earned while you were a resident is taxable by New York, and certain income that accrued before the move, such as some deferred compensation or installment sale gains, may be taxable by New York even if received afterward. A large transaction such as the sale of a business needs careful timing around a move.
New York may still tax some of your income
Moving out doesn’t end New York tax on income from New York sources. Rental income and gains from New York real estate, and income from a business operating in New York, remain taxable. So do wages for work performed in New York. Under New York’s “convenience of the employer” rule, nonresidents who work remotely for a New York employer may owe New York tax on those days as well, unless the employer requires the work to be done outside the state.
Planning a move
If you are considering a change of residence, plan the steps before you move and document them as you go. We help clients map out a move, track their days, prepare part-year and nonresident returns, and represent them in residency audits. Learn more about our private client services.
This article is general information, not tax or legal advice. Residency rules are fact-specific and change over time. Consult your advisor before acting.