President Donald Trump recently announced he intends to change his residence from New York to Florida. The move is an attempt to save on state tax obligations. New York is notorious for its large state tax while Florida has none.
The attempt will likely result in an audit — and New York auditors are good at what they do. The auditors will look to establish that President Trump has not truly moved. If successful, President Trump could still find himself facing a large New York state tax bill. Even if the auditors are not successful, President Trump will likely find himself facing a long and costly court battle.
What do state tax auditors look for?
The issue provides an opportunity to discuss what constitutes a change in residence for tax purposes. Auditors are looking to establish which state the taxpayer considers home. This generally involves two tests: one looking at domicile, the other at the time spent in the state.
To determine domicile, auditors will look for things the taxpayer would consider “near and dear to their heart.” In one often cited example out of New York, an administrative judge decided a former New Yorker resided in Texas for tax purposes not because of the type of home he owned in Texas. Instead, the evidence that tipped the ruling in the taxpayer’s favor was the fact that he moved his elderly dog to his home in Texas. Other examples can include the location of a rare book, antique collection and insurance policies as well as where the taxpayer seeks medical care and registers to vote.
The second test often used by states involves a look at the numbers. How many days did the taxpayer spend in the state? In many cases, if the taxpayer spent more than 183 days during the year in the state, they will likely be expected to pay state taxes.
Will President Trump pass these tests?
As noted in a recent review in the Wall Street Journal, it is unlikely President Trump has established residence in Florida. Time spent in the White House is not seen as a move, but more akin to a temporary move. He could still take steps to pass these tests, including selling property in New York.