We previously wrote on state domicile – https://www.mooresrowland.tax/2019/11/us-state-tax-residency-vs-domicile.html
Florida has no personal income tax and no state estate tax, whereas New York currently has an income tax rate as high as 8.82% and estate taxes on estates over $5,850,000.00 at a rate as high as 16%. President Trump has recently publicized his decision to make such a move. But the switch to make Florida one’s legal domicile for tax purposes is not as easy as one might think.
For income tax purposes, if you start off as a New Yorker and file New York state resident income tax returns, the New York State taxing authorities are not going to let you off the hook so easily. The burden of proof to show you have changed your domicile is on you, not on New York State who wants you to remain a New York domiciliary.
In addition to taxing people who are domiciled in New York State, New York taxes individuals as residents if they have a permanent place of abode in New York and spend 184 days or more in New York. So the first order of business is to spend more than half the year outside of New York State. This can be important because a New York resident or domiciliary is taxed on income from whatever source, but a nonresident is subject to tax only on New York source income.
Many people think this is all you have to do in order to avoid New York State income tax. However, this is the bare minimum. To change one’s domicile from New York, one needs to have a residence in a new location along with the intention to make the new residence a “permanent home”.
Domicile is a factor of intention. One is a New York domiciliary for estate and income tax purposes if New York is his or her permanent home and he or she has intention of returning there. There are five primary factors that New York State auditors look at to evaluate if one has changed his or her domicile out of the state for income tax purposes.
In addition to the primary factors, there are other facts, subordinate as they may be, that can be looked at by New York State to determine if one has given up his or her New York domicile. These factors include such things as
One can successfully change domicile from New York State to Florida or another income tax favorable state. New York State, however, is likely to try to find connections and factors which show this is not the case. If you are thinking of making the change, make sure you have as many factors as possible on your side.