Snowbirds and Residency for State Tax Purposes: 3 Things to Know
Many people with financial means, including many retirees, escape northern climes this time of year for sunnier vistas in Florida, Arizona, or elsewhere.
It’s a great way to avoid the hassle of snow and ice while working on your golf game or enjoying other amenities allowed by warmer weather.
But what state tax obligations are in play when you spend a substantial amount of time in more than one state? Here are three important things to know.
Maryland uses the 183-day rule on physical presence for state tax purposes.
Like many other states, Maryland uses the so-called 183-day rule to determine residency for state tax purposes.
If your permanent home is in Maryland, or you maintain a place to live there for more than six months of the year, Maryland will be looking to tax you as a full-year resident.
This rule is operative for those who were physically present in the state for 183 days or more. In other words, if you spend more than half the year there, Maryland will be looking for you to file a full-year resident return.
There are national rankings on which states are most (or least) tax-friendly for retirees.
The respected financial publication Kiplinger’s compiles national rankings on how states vary in taxes on retirees.
For example, Kiplinger’s views Florida as tax-friendly. Arizona, however, ranks as an intermediate status of “mixed,” according to Kiplinger’s.
Retirees sometimes get in trouble with tax authorities by claiming their home in Florida or another sunbelt state as a permanent residence.
It’s not uncommon for snowbird retirees to buy a second home in the warmer-weather state.
In many case, this state will have lower income taxes than where you spend the rest of the year. If you claim your warm-weather home as your permanent residence, it can lead to conflict with revenue authorities in those places, such as Maryland, Virginia or the District of Columbia.
You’ll need to be prepared for a possible tax audit by those authorities.
