The determination of a tax home is made on an individual basis. A husband and wife could each have a separate tax home if they each have a principal place of business at different locations.
Generally, a taxpayer’s tax home is the location of his permanent residence. The IRS has often interpreted one’s tax home to be the location of the taxpayer’s principal place of business. The Second, Fifth, Sixth and Ninth Circuit Courts, however, have all rejected or limited the IRS’s interpretation of the term “home.” These courts have maintained that a taxpayer’s tax home is the location of his permanent abode or residence.
The Supreme Court has refused to settle the issue. The dissenting opinions have agreed with the above Circuits by interpreting “home” as the taxpayer’s permanent abode or residence. However, the Supreme Court did hold that the taxpayer’s costs for travel, etc., to work elsewhere from his tax home were nondeductible because they were a result of the taxpayer’s personal choice to live away from the principal post of duty, rather than as a result of business exigencies.
Moving to Florida—or Any State without Income Tax?
Many of our clients reside in Georgia during their working years, making it their tax home. At some point, they may purchase a second home in Florida. Florida, as many of you know, does not have a state income tax. If you are thinking of moving to Florida in your retirement years, don’t automatically assume that it is less expensive from a tax standpoint. Florida generally has higher sales tax and higher gasoline taxes, to name two higher expenses. Georgia has a retirement income exclusion per taxpayer, starting at age 62, of $65,000. Up to $4,000 of earned income, as well as interest and dividends, capital gains, and pension income can also be excluded from Georgia taxable income starting at age 62. In addition, state income tax is not paid on Social Security income.
Change of Residency
If you decide that you are spending more time in Florida than in Georgia and you wish to make the move establishing your Florida home as your permanent residence and your Georgia home as a vacation home, you should dot your I’s and cross your T’s:
- File a declaration of domicile with the Clerk of the Circuit Court in the county of Florida in which you reside;
- Surrender your Georgia driver’s license and obtain a Florida driver’s license;
- Change all applicable documents to include your new place of domicile—passports, contracts, deeds, leases, credit applications, etc;
- Register your motor vehicles in Florida;
- Transfer your checking and savings accounts to Florida;
- Notify all social and religious organizations of your change of address. Obtain non-resident memberships at Georgia clubs;
- Obtain a safe deposit box in Florida and move the appropriate documents and items;
- Register to vote in Florida and vote;
- Remove your name from the Georgia voter rolls;
- File tax returns with your Florida address;
- Revise your Will to reflect Florida as your state of domicile, and
- Rescind your Georgia Homestead exemption and claim the Florida Homestead exemption. To be eligible to claim the Florida Homestead exemption, you must be in Florida more than 182 days.
Not Moving—But Not At Home?
If you really must work away from your home on a temporary basis, please review the IRS’s publications on Travel and Business Expenses. There are situations where you can take legitimate deductions while living away from home. If you would like further information regarding this issue as well as any other tax related issue, please contact Henssler Financial at 770-429-9166 or at experts@henssler.com
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
