Florida has no personal income tax and no state estate tax, whereas New York currently has an income tax rate as high as 8.82% and estate taxes on estates over $5,850,000.00 at a rate as high as 16%. President Trump has recently publicized his decision to make such a move. But the switch to make Florida one’s legal domicile for tax purposes is not as easy as one might think.
For income tax purposes, if you start off as a New Yorker and file New York state resident income tax returns, the New York State taxing authorities are not going to let you off the hook so easily. The burden of proof to show you have changed your domicile is on you, not on New York State who wants you to remain a New York domiciliary.
In addition to taxing people who are domiciled in New York State, New York taxes individuals as residents if they have a permanent place of abode in New York and spend 184 days or more in New York. So the first order of business is to spend more than half the year outside of New York State. This can be important because a New York resident or domiciliary is taxed on income from whatever source, but a nonresident is subject to tax only on New York source income.
Many people think this is all you have to do in order to avoid New York State income tax. However, this is the bare minimum. To change one’s domicile from New York, one needs to have a residence in a new location along with the intention to make the new residence a “permanent home”.
Domicile is a factor of intention. One is a New York domiciliary for estate and income tax purposes if New York is his or her permanent home and he or she has intention of returning there. There are five primary factors that New York State auditors look at to evaluate if one has changed his or her domicile out of the state for income tax purposes.
HOME A taxpayer has to, at minimum, have a new home outside of New York State. It is harder for a taxpayer to prove a new domicile if he or she retains a New York home, particularly if the New York home’s value exceeds the new home.
ACTIVE BUSINESS INVOLVEMENT A taxpayer’s employment or active participation in a New York trade, business, occupation or profession, as well as his or her investment in, and management of a New York closely held business is a factor which strongly negates an argument that his or her domicile is being moved out of New York State.
TIME As indicated above a taxpayer has to spend less than 184 days in New York State to assert that his or her domicile is no longer in New York. But in addition to this, the taxpayer needs to spend more time in the newly asserted domicile than in New York. For taxpayers who travel frequently, this can be difficult. Let’s say you are only in New York 150 days, and assert Florida is your new home. But you are only in Florida for 120 days. The other 95 days you are travelling to other locales. This can be problematic.
ITEMS NEAR AND DEAR The things most important to you are usually kept in your permanent home. If a taxpayer keeps items of significant sentimental factor, such as family heirlooms, artwork, collections or pets, in New York State, it is harder to argue that New York is not meant to be your permanent home
FAMILY CONNECTIONS Having a spouse or minor children remain in New York State is another negative factor to have if trying to prove you are not a New York domiciliary.
In addition to the primary factors, there are other facts, subordinate as they may be, that can be looked at by New York State to determine if one has given up his or her New York domicile. These factors include such things as
Where does the taxpayer receive financial correspondence?
Where does the taxpayer keep a safe deposit box?
Where does the taxpayer have a driver’s license and where is his or her car registered?
Where does the taxpayer vote?
Where does the taxpayer list his or her domicile on his or her Will and other legal documents?
One can successfully change domicile from New York State to Florida or another income tax favorable state. New York State, however, is likely to try to find connections and factors which show this is not the case. If you are thinking of making the change, make sure you have as many factors as possible on your side.
Gary Vaynerchuk has said that “we are living in the best era
of all time.”
I honestly believe that it is now easier to start a business
or create a side hustle thanks to the internet.The internet does not care what color you are, what nationality you are,
how tall or short you are etc. Clients only want to know whether or not, you
can deliver on your value proposition.
Unfortunately, starting up in one thing but being successful
is another.Part of being successful is
understanding the rules of tax and business structures.These are things that are not taught in
business school.Worse yet,
entrepreneurs look for advice from unqualified and frankly dangerous keyboard
warriors who mislead and misunderstand the nuances of international business
Thank you for taking the time to get to know us. We are Hayden T Joseph CPA LLP (http://www.htj.tax) and we are an independent member firm of the Moores Rowland Asia Pacific Network (http://mooresrowland-asiapac.com). The group has over 30 offices in 11 countries.
In Singapore, the 3 main Moores Rowland entities are – Our audit practice which is managed under MRI Moores Rowland LLP, Chartered Accountants and Public Accountants approved by the governing body - the Institute of Singapore Chartered Accountants. Moores Rowland Solutions Pte Ltd which is a business consulting firm focused on enduring business value through people and for people - http://mooresrowland.sg/index.html Hayden T Joseph CPA LLP which works on International Tax in general, and United States International Tax in particular.
Background A state must have a strong connection, also known as “nexus,” to an out-of-state business before it can impose sales and use tax obligations on that business. Previously, physical presence was the law of the land—a business had to have an office, warehouse, employees, or some other physical presence in the taxing state for tax nexus to exist. In 2018, the Supreme Court overturned the decades-old physical presence requirement and ruled that states can impose sales tax obligations on out-of-state businesses with no physical presence in the state. Post-Wayfair, nexus exists for sales tax purposes when a “taxpayer ‘avails itself of the substantial privilege of carrying on business’ in that jurisdiction.” Nexus can still be established by physical presence, but can now also be established by economic or virtual contacts. This new standard, referred to as economic nexus, significantly expands taxpayers’ obligations to report, collect and remit sales tax. Economic Nexus Economic nex…
US citizen? 1. pay ZERO US federal income tax, 2. only a 4% corporate tax for my businesses and 3. ZERO capital gains and dividends tax.
Puerto Rico is a commonwealth of the US. That means that most things here fall under US federal law, like immigration and customs and border enforcement. But Puerto Rico’s tax system is independent from the US. Puerto Rico has its own tax agency, like the IRS. That’s what makes Puerto Rico unique. It’s a part of the US, but tax-wise, it’s not.
If you’re a regular employee, don’t be discouraged. If you can work anywhere – which is increasingly common these days – see if you can switch to be a contractor for your company. You’ll be able to enjoy the same tax privileges.
How to slash your corporate tax rate to only 4%
1. You incorporate a business in Puerto Rico that’s providing a service. And that service is being sold to people outside of Puerto Rico. Your service could be management consulting, accounting, legal services, info…