taxes

How Snowbirds Can Trim Tax Bills in Retirement

Take these nine steps to establish residency in a lower-tax state.

I read your column about states that don’t tax retirement income. I’m retired and plan to spend part of the year in New York and part in Florida, which has no state income tax. What do I need to do to make sure I’m considered a resident of that state?

Snowbirds need to be particularly careful when establishing their state of residency for tax purposes. Some higher-tax states, such as New York, have intensified efforts to audit part-year residents who claim a lower-tax state (such as Florida) as their state of residence.

The first step is to prove that you lived in the lower-tax state—in your case, Florida—for more time than the higher-tax state. “Keep a diary that shows where you were on every day,” says Michael Goodman, a CPA in New York City.

But establishing the number of days isn’t the only requirement, says Terry Seaton, a CPA in St. Augustine, Fla. He recommends changing your driver’s license, car and voter registration to Florida, using your Florida address on your federal income tax filings, and doing your primary banking with a Florida bank. Also, list your Florida address on all life insurance policies, brokerage accounts and other legal and financial documents. Notify Medicare, Social Security and other government agencies of your Florida address, and file a “Declaration of Domicile” form with the Clerk of the Circuit Court. Taking all of these steps isn’t a requirement, but it does help build your case if you’re audited by your former state. Similar steps can help you build your case for residency in other states.

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