Changing Your Domicile For Tax Purposes: Easier Said Than Done

Thomas Campaniello had apartments in New York City and Florida. He also had a sizeable income. In 2006 Campaniello decided to change his domicile to Florida but still spend time in both states. That is easier said than done, as far as the taxing authorities are concerned. You can’t just declare where you want to be taxed. Under New York State law, one must prove “by clear and convincing evidence” that the New York domicile has been abandoned.

Here’s what Campaniello did right. He kept detailed records, proving that he spent less than six months in New York (169 days, to be exact). He provided the tax authorities with summaries of his trips, copies of his passport pages proving his foreign travel, and credit card and cell phone statements for all of 2007. He had a Florida driver’s license, owned his car there, and kept important personal items, such as his doctoral diploma, in his Key Biscayne apartment.

Here’s what Campaniello did wrong, according to the Administrative Law Judge who heard his case. Although he spent more time in Florida than in New York, he did return to New York for some portion of almost every week. He received bills at his New York address, had family ties in New York, kept personal belongings and clothing in his New York apartment, ran his Florida and New York businesses from his New York offices, and continued seeing medical professionals in New York. He did not clearly surrender his New York domicile in the eyes of the taxing authorities.

In conclusion, Campianeillo owed New York tax as a full-time resident, not a part-time resident, as he had filed. That meant there was a shortfall of $319,009.00 in New York State taxes, $169,772.00 in New York City taxes, plus penalties and interest that brought the total owed to $709,429.00.

Steps you can take to legally convince authorities you have spent more than 6 months in your new domicile:  

1. Keep detailed records on travel, cell phone, and credit card bills
2. Register to vote in your new domicile
3. Join a local place of worship
4. Have all mail forwarded to the new domicile
5. Retain new lawyers, accountants, and doctors in the new domicile
6. Change your driver’s license to the new domicile
7. Register a car in the new domicile
8. Apply for the Homestead Exemption on the new domicile residence

If you have residences in multiple states or countries, you may want to enlist the assistance of a trusted financial advisor. For more information on how Legacy can help with your tax strategies, visit our Tax Planning page here: https://www.lptrust.com/our-services/tax-planning/.

If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or info@lptrust.com.

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Any developments occurring after July 1, 2022, are not reflected in this article.

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It is not intended as legal, accounting, or financial planning advice.