How Does New York Tax Residents for Leaving the State?

When New York residents leave the state and move elsewhere, they must pay attention to New York’s tax rules. If they don’t take proper steps, they may find out that they are still liable to pay taxes to New York as if they were still residents. If you are considering a move but plan to maintain a residence in New York, it is advisable to consult a tax attorney. An attorney can help you understand what requirements you must meet to avoid being taxed as a New York resident. If you have already moved and are now being audited, a lawyer can assist you in presenting the strongest case possible to the New York State Tax Department. Either way, here are a few key points to understand:

Taxation of New York Residents

New York imposes income taxes on its residents based on their residency status. There are two tests for New York residency. The domicile test considers various factors to determine where your “true home” lies. The statutory residency test looks at whether you maintain a permanent place of abode in New York for substantially all of the year and spend more than 183 days in the state. If you meet the requirements of either test, you may owe taxes to New York.

New York residents must pay taxes on all income regardless of where it is earned. Nonresidents only pay taxes to New York on New York-sourced income, such as wages earned in the state. Since New York has a high tax rate, making a mistake in changing residency can have significant financial consequences.

Tax Implications of Leaving New York

If you move out of state and change your domicile correctly and avoid statutory residency, you will likely still owe taxes for the portion of the year you lived in New York. Residents who move out of state during the tax year are generally required to file a part-year resident tax return for that year and pay income taxes on any income earned while a New York resident. In addition, if you sell assets while a New York resident, those gains are subject to New York tax, even if you move before filing your tax return.

A tax professional can help you determine how much you owe to New York as a part-year resident.

As discussed in the prior section, if you fail to change residency, you would have to pay taxes to New York as a full-time resident.

Preparing for a Move

New York is aggressive in enforcing its residency rules. As a result, it is best to consult a tax lawyer to help you plan for the move and avoid any unforeseen tax liabilities. That includes understanding how to document your move carefully in case of an audit. Audits can be highly intrusive, with auditors requesting a wide range of evidence regarding your personal and business activities, such as records from cellphones and landlines, credit card statements, utility bills, E-Z Pass and security card data, banking transactions, travel documents, and other information.

If you’re contemplating a move or being questioned about your residency status by New York State, contact us for a consultation.

For more information on New York’s residency rules and how to survive an audit, download our free eBook.