Where is Home?

C&G Review
Spring 2001

It's where you think it is.

Clients (especially those at or near retirement age) frequently ask us about Florida residency. Aside from climate, the question is usually driven by differences between Pennsylvania and Florida personal taxation.

Pennsylvania has a personal income tax, but Florida does not. Pennsylvania has a combination of an inheritance tax and an estate tax which is frequently more, but will never be less, than Florida's estate tax. Florida does have an intangible personal property tax, but recent legislation has both made that tax fairly easy to avoid and significantly reduced the tax rate when it is imposed. Further, Florida's governor and legislature appear to be on a course to eliminate the intangibles tax. In essence, personal taxes in Florida are usually less than in Pennsylvania.

How does one become a Florida resident (and a Pennsylvania nonresident) for tax purposes? The jurisdiction of taxation usually depends upon residency, and residency is often related to domicile. A person is generally a resident of the place where he or she lives on a regular basis, but a domicile is that place which a person believes in heart and mind to be home and to which he or she intends to return, no matter how long away or for whatever reason.

Under Pennsylvania's regulations, if a person purchases a home in Florida and becomes a domiciliary of Florida (that is, if Florida becomes his permanent home in his heart and mind), but retains a home in Pennsylvania, then he will have become a nonresident of Pennsylvania for income tax purposes so long as he spends fewer than 183 days during the year in Pennsylvania. On the other hand, if that same person retained Pennsylvania as his permanent home (i.e., his domicile), then he will be subject to Pennsylvania personal income tax as a resident unless he (i) has no permanent place of abode in Pennsylvania, (ii) does have a permanent place of abode outside Pennsylvania and (iii) does not spend more than 30 days in Pennsylvania. In other words, if that person sells his Pennsylvania home and moves to Florida with the intent that Florida become his permanent home, he will become a nonresident for Pennsylvania tax purposes. But, if he keeps his place of abode in Pennsylvania and still considers Pennsylvania to be his permanent home no matter how much time spent in Florida, then for tax purposes, he will continue to be a Pennsylvania resident even if he also owns a home in Florida.

Since domicile is a matter of intent, it is difficult to objectively demonstrate. Nevertheless, the ordinary steps taken when permanently establishing a new home in a new location are generally evidence of change of domicile. No individual step is essential, but all of the steps together paint a picture that will demonstrate whether one has changed one’s domicile.

If changing a domicile to Florida, all of the following as applicable could (and for tax purposes should) be done:

File a Declaration of Domicile with the local Florida court
File for homestead status of his Florida residence (for real estate tax benefits)
Obtain a Florida driver's license, register automobiles in Florida and obtain appropriate Florida automobile insurance coverage
Register to vote in Florida (and cancel voter registration in the former state)
Refer to oneself as a Florida resident in wills and trust agreements
File future federal income and other tax returns using the Florida address
File Florida intangible personal property tax returns
Change brokerage accounts, stock holdings and the like to reflect the Florida address
Transfer banking accounts and relationships to Florida
Withdraw from existing clubs where membership is dependent upon residency or change memberships to "non-resident" status
Transfer religious affiliations to Florida
Become active in clubs and organizations in Florida
Spend as much time as possible in Florida
Refer to oneself as a Florida resident in all contracts and other writings and conversations where appropriate
Generally conduct one's affairs as might logically be expected of a Florida resident

Taking steps to evidence your intent that Florida has become your permanent home will help ensure that your family and you enjoy the tax benefits that Florida residency offers.

We look forward to seeing you in our Naples office!

For more information, please contact hcohen@cohenlaw.com.