The Planner's Perspective: Snowbirds - Flying South For More Than Winter

By Paul Morrone CFP®, CPA/PFS, MSA

Snowbirds are faced with an increasingly complex challenge, proving their state of residence for tax purposes. While the proverbial six-month-and-a-day rule may be a good place to start, it is not necessarily so cut and dry. States are challenging residency status more frequently following retiree and wealth migration trends as relocation to low or no-tax states becomes a more frequent occurrence. Precedents are being established which may force wealthier taxpayers owning multiple properties to make more calculated moves as they consider a residency change.

As with many things in this world it’s not necessarily what you do, but how you do it that will determine the ultimate success of your plan. Keeping a travel journal is a best practice to show where you spent the majority of your time, but is only one of many pieces that will be evaluated if your residency is ever challenged. There are a multitude of criteria that a State Department of Revenue Services may use to determine your residency for tax purposes. The blatantly obvious ones include simply reviewing your mailing address, driver’s license, voter registration, where you conduct business, etc. Recent audits, however, have revealed that states weigh more subtle items equally, if not more heavily, than those items listed above.

Beyond registration for your bank, investment and employee benefits accounts are the smaller details that may reveal which state you ‘treat’ as your home as opposed to what it may say on paper. Where do you register your cars, boats or other items of tangible personal property? Have you executed new estate planning documents to comply with new local laws? If you’ve moved to a state such as Florida, have you applied for the homestead exemption for your property tax? Have you given up any senior citizens or veterans benefits in your existing state of residence?

Digging deeper, where is your discretionary spending concentrated? Where do you engage in charitable activities or serve on local or municipal boards/committees? Where is your pet licensed? Where is your primary place of worship? And as immaterial as it may sound, where do you keep items of extreme personal importance? While some of this may seem trivial, together these considerations paint a complete picture as to what state you call home.  As they say, if it looks like a duck and walks like a duck and quacks like a duck…