A year of $2.1 million in compensation, mostly bonus, means hundreds of thousands of dollars in New York state tax. That is what a listener told us they stand to save by moving from Scarsdale to Palm Beach next spring. It is also why New York will be looking.
The listener’s concern was this: “It seems like New York residency audits assume you’re trying to game the system, rather than someone with legitimate reasons to be back in the state.” Their reason is a real one. Her husband’s mother is in a memory care facility ten minutes from their current home, and the family expects to spend three to four months a year in the Northeast.
Why You’re on Their List
I’d be personally disappointed in New York if it saw this move and didn’t check. Roughly $100,000 a year in state tax is at stake, and plenty of people are willing to gamble on residency for that kind of money. The state starts from the assumption that you’re not telling the truth because enough people aren’t. That’s not a judgment on you, and it means the audit is a matter of when and how well you are prepared, not whether.
Statutory Residency Is the Easy Test
Spend 183 days in New York and you’re a statutory resident. Three to four months back in the Northeast is roughly 90 to 120 days, so on its face you’re under that line. Counting carefully matters, though, so keep your own calendar of days in and out of the state from the first day. But staying below 183 days is only half of it. You have to clear both tests.
Domicile Is Where You Build the Book
Domicile is subjective, and the burden is on you to show you’re now a Floridian. Auditors look at where you live, where you do business, how much time you spend in each state, and even where your friends are. I’ve heard stories out of Massachusetts of auditors reading social media posts to see where people spend weekends and who they spend them with. An electricity bill in your name is not enough. They want to know whether you are truly living there, and if you are, they can’t come after you. You can defend yourself in an audit, and that defense is the biggest factor in how it goes.
The extreme cases tend to be extreme. Someone buys a small condo in Florida, keeps a huge house in New York, keeps the car and the social calendar in New York, and then tries to convince the state they moved. That is a hard case to win, and it takes far more than a small condo to make it.
What a Strong File Looks Like
Your situation looks very different. Your husband is already working out of the Florida office. You’d be voting in Florida, registering your cars there, paying bills there, and building your social life there. Keep logs of where you are working. If you’ve given up the New York house, own a home in Florida, and your income and friends are in Florida, then it is hard for the state to argue you’re still a New Yorker. This is not a moment to cut corners or experiment. Talk to your CPA about the specific risk and how to document it, but if you do everything by the book, I don’t think you have much to worry about.
Rent in New York for Those Months
If you want to go one step further, rent somewhere in New York for the three to four months you’re back, rather than keeping a house there. Your husband’s mother being ten minutes from your current home is a legitimate reason to be back, and nobody will question that. What an auditor can question is where you keep a home and a routine. Renting removes a tie the auditor would otherwise point to and makes the Florida home the only home you own. With the state tax at stake, I’d treat that as a cheap hedge. Do the things that make you a Florida resident, live it, and stop worrying about it.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on changing your state of residency without drawing an audit, watch the full podcast episode here.