Last year, President Trump signed into law a sweeping $1.5 trillion tax reform bill. Residents of high-tax states, like New York, could possibly be most affected by the changes, which included reducing the federal tax deduction for state and local taxes. As IRS data indicates, New Yorkers take the highest deduction, averaging $21,038.02 in state and local tax (SALT) deductions. Come April, that’s money that will be owed to the government. So, it’s not surprising that some residents have considered leaving the state as a solution to avoid a tax increase.
A handful of ultra-wealthy New Yorkers have already headed down south to Florida, which has no state income tax. While the idea of pocketing that $21,000 may entice you to consider a move, we recommend you hold off on buying annual Disney passes for the time being.
New York’s Department of Taxation and Finance will require a lot more than your word and a copy of your new driver’s license as proof. Here are the five factors they consider when determining residency:
- Is the new home comparable in size to the former residence (weekend vacation condo vs. 10-bedroom estate)? Are family gatherings and holidays still being celebrated at the New York residence?
- The State of New York still considers someone a resident of the state as long as they maintain property in New York, and spend 184 days or more in the state during the tax year.
- Active business involvement. For taxpayers who still work, auditors will want to know where they’re conducting the majority of their business.
- Personal items. Often referred to as “the teddy bear test,” auditors will want to know where sentimental, treasured, and important personal items are kept.
- Family members. The location where family — especially children and spouses — live, work and go to school is a key determining factor.
Many argue that few people are likely to uproot their family, quit their jobs, pull their kids from school, and leave their friends just because of SALT. Yet others feel taxes could very well be a key determining factor for those who move between now and April. Regardless of what New Yorkers decide, it’s important to remember it’s not just a matter of packing up and moving.
Boris Benic and Associates has been providing accounting, tax and consulting services to entrepreneurs and middle-market businesses for 25 years. We pride ourselves on providing the individualized and personal service of a small firm while delivering the quality and expertise of a large firm.