Where do you live – for state tax purposes?

Dual state residency issues are becoming more frequent audit issues as states seek to increase their revenue.

In the digital data-sharing world, it’s very important to maintain good tax records. If you own property such as a vacation home in a state where you work, and you reside in another state, you may find yourself in a tax dilemma. Your records may or may not assist you in proving your “tax” residency is accurate.

Your residency is defined by tax law or statute, which in most states is based on how many days you spend in the state and whether you maintain a living space. If you own a house and work in New York but believe that you reside in a neighboring state, you may be subject to dual residency taxes. Dual residency would mean you owe taxes in two states on your entire income, with no offsetting tax credit for taxes paid to another state.

If your EZ-pass, credit card statements, cell phone and other records do not support your being out of the state for more than the statutorily defined period, you may find yourself in a tax problem. Alternatively, if your records show you were in a state for the required number of days, you are also in a tax dilemma.

In the case of New York, you’re considered a resident even if you are domiciled outside New York but maintain a permanent place of abode in New York and spend 184 or more days there. Generally, a permanent place of abode is a residence you or your spouse maintains, whether you own it or not, that is suitable for year-round use. The residence must have basic facilities, such as for cooking, bathing, sleeping, etc.

If the living quarters cannot be used all year, they may not be considered a “residence.” A few examples are given in New York State Tax Bulletin TB-IT-690, “Permanent Place of Abode.” As an example, consider an individual who owns a fishing cabin in the mountains. If the cabin is suitable for use only during the warmer months of the year because it doesn�t have adequate insulation or heating for winter use, it isn’t judged to be a permanent place of abode.

Alternatively, even if someone doesn’t own or lease premises within the state, it’s possible for the individual to be judged a resident by virtue of “maintaining” the property.

The state provides an example: Lisa lives in a condominium with Mark during the workweek. Although only Mark’s name is on the lease, Lisa regularly gives Mark money to pay for her share of the household expenses. Lisa has lived in the apartment for three years. Since Lisa makes monetary contributions to maintain her living arrangement in the apartment, the apartment would be considered a permanent place of abode for Lisa.

A corporate apartment suitable for permanent year-round use may also be considered a person’s permanent place of abode if the dwelling is principally available to that person. Even if others use the apartment on occasion, it may still be defined as the person’s permanent place of abode.

A corporate apartment may not be considered a permanent place of abode for the taxpayer if the primary purpose or use of the corporate apartment is other than as living quarters of the taxpayer or the taxpayer’s family. An example would be making the apartment available on a first-come, first-served basis to exec­utives, salesmen or important clients when they’re visiting the corporation.

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