Change of Domicile

An individual’s domicile is the state where the person resides or intends to return to. People change their state of domicile for many reasons. For instance, they want to be close to their children, they are looking for favorable climate, or they want a favorable tax structure. For state tax purposes, a domicile change is respected when the taxpayer proves s/he abandoned the prior state of domicile and adopted the new state as the individual’s domicile. This test is challenging when the taxpayer keeps a home in a former state as a seasonal residence.

To prove abandonment, a taxpayer must change the person’s driver’s license, car registration, voting registration, and address the below:

1. Establish a change in domicile: Sever contacts with the prior state, and make new contacts in the current state. Tax authorities look at pre- and post-domicile changes. Tax authorities look at the time an individual spends in each state by reviewing business contacts in each state, the size and value of a residence in each state, and family and social connections in each state. Tax authorities investigate to see if a person abandons contacts in the prior state and replaces them with similar contacts in the current state.

2. Examine life: Complete a declaration of domicile in the new state. Examine where time is spent and modify patterns to spend more time in the new state. For example, if a person normally spends winters in Utah, and later decides to change the domicile to Utah, the person needs to show life has changed, rather than continuing to exist the way it was.

3. Time changes: It is easier to show intent to change domicile if the change is done over a short period of time rather than gradual steps to change domicile over an extended period of time. When the change is gradual, it is hard establish the date on which the change completed.

4. Maintain records: Keep detailed records of location each day. To establish the change, maintain the lifestyle so it is not difficult to reconstruct records when audited. For instance, keep utility bills that show a place has been lived in.

When changing domicile, consult with an experienced New York tax attorney to learn how to examine patterns of life and maintain records for establishing the change.