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06.03.20

Domicile: Why it matters for New York income tax and estate tax purposes

BY Brian S. Roth

Domicile is the foundation for New York income tax and estate tax. An individual who is domiciled in New York will be taxed as a resident even if the individual has moved out of the state unless there are affirmative actions taken by the individual to change his or her domicile.

An individual is subject to New York income tax as follows:

  • An individual domiciled in New York is a New York resident and is taxed on all income;
  • An individual not domiciled in New York but who maintains a permanent place of abode in New York and spends more than 183 days in New York (aka, a "statutory resident") is a New York resident and is taxed on all income; and
  • An individual not domiciled in New York or a statutory resident is a non-resident and is only subject to income tax on New York source income.

A decedent's estate is subject to New York estate tax if the estate is greater than $5,850,000 (for decedents dying in 2020) as follows:

  • If the decedent was domiciled in New York at his or her death, the estate is subject to New York estate tax on all of the decedent's assets except for real or tangible personal property having an actual situs outside New York State; and
  • If the decedent was not domiciled in New York at his or her death, the estate is subject to New York estate tax on only tangible and real property having an actual situs in New York State.

So what is a person's domicile? Domicile is generally the place you intend to keep as your permanent home, where such permanent home is located, and the place you intend to return to after being away. The domicile test in New York looks at five primary factors:

  • Home (New York ties vs. non-New York ties),
  • Active business involvement,
  • Time spent in each location,
  • Near and dear (location of personal items), and
  • Family connections

What steps should you take to change domicile?

  • File a Declaration of Domicile,
  • Change your address on bank and financial statements,
  • Change the location of your safe deposit box,
  • Change your vehicle registrations and driver's license,
  • Register to vote in the new state,
  • Keep accurate records of where you are located, and
  • Change your estate planning documents.

If you are thinking about moving from New York, it is critical that you contact your advisors to ensure all necessary steps are taken to change your domicile from New York. There could be unintended tax consequences for yourself and/or your heirs upon a residency or estate tax audit if you do not change your domicile in the correct manner.

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Brian S. Roth

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