HOMENEWSMULTI-STATE RESIDENCY – WHAT YOU NEED TO KNOW
NEWS
Multi-State Residency – What You Need to Know
AUGUST 16, 2017
MBAF’s Gary M. DuBoff discusses multi-state residencies with the TAXPRO Journal.

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“Home is where the heart is” is an old expression that may not exactly fly with a taxing authority examiner. The tax concept of domicile can be complex, particularly when you encounter a client who may spend time in, and receive income from, multiple states. The IRS and most state tax authorities define domicile as “the place where the taxpayer has his true, fixed, permanent home.” That’s what is legally known as domicile, or permanent residence.

It’s important to point out that the “domicile” does not necessarily apply to any one specific dwelling. In other words, you can have many homes or residences, but from a legal and income tax point of view, you can only have one domicile, or permanent residence. However, many states will pursue a case to tax a person even though that state is not necessarily the taxpayer’s domicile by establishing what they consider statutory residence. They do this by declaring you a resident of the state after you have been in the state for a certain number of days.

With tax laws and tax rates differing from state to state, where you establish domicile can have a significant impact on state income tax and, potentially, your state estate tax.

Primary and Secondary Factors
When it comes to determining domicile, most states employ primary and secondary factors. The five primary factors are:

Home
Active business involvement
Time
Items near and dear
Family connections
In terms of a multi-state residency audit, domicile is almost always determined based on these primary factors. A look at secondary factors will only be done when an equal case for domicile can be made by another state based on the primary factors. The other factors that could be brought into play include but are not limited to:

Declaration of domicile
Mailing address
Safe deposit box
Voting
Car, boat and plane registration