Can President Trump change residence for tax purposes?

President Donald Trump recently stated in a Tweet that he was changing his residence to Florida. According to the tweet, the move was the result of poor treatment by politicians in New York even though he "pays millions of dollars in city, state and local taxes each year."

But will the move result in tax savings? Unfortunately, the answer is complicated. This piece will briefly consider why the question is more common this year and why it is difficult to answer.

Question #1: Why are people looking to move?

President Trump is not alone in his desire to change his residence for tax purposes. The Tax Cuts and Jobs Act (TCJA) led to major tax reform. One specific provision has made it very costly for people to remain in high tax states, like New York. This provision put a limit on how much residents could take on their federal tax returns for the State and Local Tax deduction (SALT). As a result, New Yorkers and others in high tax states found themselves paying higher taxes.

Question #2: Why is it difficult to answer?

A simple move generally does not suffice. Those who move from a high tax state must often prove they "abandoned" the old home. This can result in an investigation by the Internal Revenue Service (IRS) to determine whether the individual making the move really considers the new state, like Florida in this example, home.

There is often a time element. In New York, for example, anyone that spends 183 days in the state can be subject to tax obligations. Investigators may also look to see where items that are considered "near and dear to the heart" are kept. Examples can include pets and collectibles.

Complicating the matter even more is the fact that an individual can be deemed as a resent of two states at once. This can result in double the tax bill.

So, what's the lesson? Tread carefully. If you wish to change your residence for tax purposes meet with a professional to discuss the implications and better ensure you do not find yourself with a surprise tax bill.

If you have questions or concerns regarding your residence for tax purposes, contact Frost & Associates, LLC today at 410-497-5947.

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