Residency changes are often fraught with uncertainty from a tax perspective. States are not known for easily letting go of tax revenue and will often fight hard to keep it. An individual who has been a long-time resident tax filer of one state and in a subsequent year is either a non-resident filer or does not file at all in the former state, is at high risk for audit.
Many states tax an individual as a resident in one of two ways: as a statutory resident or a domiciliary.
Statutory residency
Classifying as a statutory resident is generally met by a seemingly objective test, with many states adopting similar parameters. For example, both New York and Pennsylvania state that an individual is a statutory resident if the person spends more than 183 days in the state and has a permanent place of abode. Although superficially objective, many taxpayers run into issues both over what is considered a day and what is considered a permanent place of abode.
What is a day?
Generally speaking, any part of a day spent in a state counts as a day. If an individual were to enter a state and head to their office for work, catch a ballgame or meet a friend for dinner, that’s a day, regardless of the overall time. What if a person merely enters a state to catch a plane? What if they stop for lunch or pick up a traveling companion on the way to the airport? What if instead, the individual enters the state for in-patient medical treatment for a serious illness? Would it matter if the medical treatment was elective, not serious or done as an outpatient? Questions abound and need to be carefully considered when counting days towards a statutory residency test.
What is a permanent place of abode?
Similar to the day count, we can apply a general rule: if a taxpayer has a home that is winterized, has a kitchen, a bathroom and is available for their exclusive year-round use, it is a permanent place of abode. Once again though, a plethora of exceptions and uncertainties exist. What if you have a simple log cabin with no heat or utilities in cold and snowy upstate New York? What if you bought your adult child an apartment of their own? What if you have access to a corporate apartment? Would it matter if the corporate apartment must be reserved on a first-come-first-served basis?
Both in determining days spent in the state and whether a permanent place of abode exists, facts and circumstances matter and must be carefully considered in determining whether a taxpayer is a statutory resident.
Related sections
