NY Vacation Homes Become Newest Target of Residency Rules

As though residency rules for New Yorkers who move to the suburbs, relocate to more taxpayer-friendly states or work remotely during the COVID-19 pandemic are not challenging enough, a new court case puts added scrutiny on the vacation homes that former NY residents may leave behind.

In the case, In the Matter of the Petition of Coulson, the NY Tax Appeals Tribunal upheld an administrative law judge’s determination that the taxpayer’s vacation property in the state is a “permanent place of abode” for residency and income tax purposes. According to the Tribunal, even without meeting the 183-day domicile rule, the taxpayers held a “residential interest” by maintaining living arrangements and exercising “the right to reside” in the home.

This ruling will allow New York State to continue to require taxpayers to report family vacation homes on Form NYS IT-203. The case is sure to give rise to more residency audits for NY residents who move to Florida or other taxpayer-friendly states, sell their main residence and keep an infrequently used vacation property.

Planning Your Move out of NY

With large NYS income tax increases on the horizon and President Biden’s proposed tax plan threatening federal tax hikes, New York residents will have more motivation than ever to seek reprieve in other states. If that is your plan, make sure your moving process includes a thorough evaluation of the strategies you will use to avoid NYS taxation after you leave the state.

The nuances of establishing a non-resident status after leaving New York can go down to the minutest details, such as proof of insurance for valuables shipped to the new state and/or lifestyle changes that could refute the residency status.

There are also trust and estate strategies that can be employed, including contributing vacation homes and having the beneficiaries pay the property taxes and insurance. Keep in mind the importance of trust residency issues when planning your move or establishing a new trust in the process.

For more information on moving out of New York and not taking your state income tax obligations with you, please contact your Grassi Tax Advisor or Jeffrey Cohen, Grassi’s Tax Services Leader, at 516.336.2475.

Jeffrey G. Cohen Jeffrey G. Cohen, CPA is the Partner-in-Charge of Tax Services at Grassi. With over 30 years of experience, Jeff specializes in serving companies within the Manufacturing and Distribution Industry, with an emphasis on the Food & Beverage and Pharmaceutical sectors. A leading tax expert in the New York Metropolitan area, Jeff has enabled his clients to realize significant tax savings through proper Income and... Read full bio