Vacation-Owners: The IRS Needs to Know Where You Live
Under U.S. tax law, payers can have only one official residence, and lockdowns may have changed the state a vacation owner calls “home.” But it’s also not that simple.
NEW YORK – Homeowners are increasingly dividing their time between two or more homes equally, which is known as the “co-primary home” trend. It’s become feasible because remote work became a viable lifestyle choice for less wealthy second-home owners during the COVID lockdowns.
While owners could consider themselves to have a co-primary home, however, the Internal Revenue Service would disagree. Under tax law, one home must be primary. That key issue needs to be resolved.
Joan Crain, senior director and global wealth strategist at BNY Mellon Wealth Management, says taxpayers can have only one domicile, irrespective of how many homes they own – and the location of their primary residence can have significant implications for the homeowner’s tax bill.
Crain says most states consider a domicile to be a primary residence in the place where the taxpayer spends the majority of their time. When the domicile is not clear cut, “state tax auditors will look at other factors, like where is your business address? Where do your credit-card bills go? Where are your doctors?” Crain says.
Meanwhile, someone who crosses state lines for work will typically get a tax credit in their home state if they paid nonresident income taxes to another state. Some states tax the income of nonresidents who spend a certain number of days physically working in the state, says Taryn Goldstein, Florida state and local tax leader at accounting firm BDO USA.
Certain states, including Texas and Florida, also give taxpayers who own their primary home a homestead exemption on their local real estate taxes.
Source: Wall Street Journal (10/14/21) Solomont, E.B.
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