Minnesota’s residency laws throw ‘snowbirds’ for a loop

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What do going to church or participating in sailing races have in common? They can affect your ‘snowbird’ tax status. (submitted photo)

Money Management

Determining residency for tax purposes often proves challenging for Minnesota’s population of “snowbirds” -- retired individuals who head south each winter.

Last year, Gov. Mark Dayton made a well-publicized attempt to enact a “snowbird tax,” expanding the number of people required to pay Minnesota income taxes.

Although that particular law did not pass, a measure imposing a 9.85 percent tax on upper-income earners did become law, giving certain individuals good reason to question their residency as it relates Minnesota’s tax laws.

Not surprisingly, states with no income tax or a rate much lower than ours are increasingly popular locations to maintain a second residence. It’s important for taxpayers who live in more than one state to consult a tax professional who can help them determine their residency status. If you don’t understand the rules, it’s relatively easy to unintentionally break the law.

Minnesota uses various criteria to determine taxpayer residency, including statutes, regulatory factors and individual behavior. To offer some clarity, the Minnesota Society of Certified Public Accountants (MNCPA) explains the standard rules of determining residency.

Statutes

• Any individual who is physically present in Minnesota for 183 or more days in a year is automatically considered a resident of the state. Regardless of other factors, persons exceeding this day count are required to pay Minnesota resident taxes.

Regulatory factors

If a person is present in the state for fewer than 183 days, Minnesota uses a set of 26 regulatory factors to determine whether he or she qualifies as a resident. These factors include voter registration, issuing state of valid driver’s license, where your vehicles are registered, professional licenses and involvement in local organizations. If filers maintain any of these aspects of their identity in Minnesota, they are eligible to be considered residents of the state.

If an individual owns property in Minnesota, but rents and lives in a dwelling in another state, Minnesota may assume that person’s residency has not been severed.

Behavior

If residency is still unclear after all of the previous factors have been considered, Minnesota may look to see if the taxpayer’s overall behavior (i.e., participation in a place of worship, involvement in community organizations, etc.) has changed since moving to his or her new home.

Taxpayers should be wary of how their hobbies and lifestyle reflect their residency status. For example, persons participating in competitive sailing may be affected, for tax purposes, by the place they choose to dock their boat or the state in which they do some or all of their racing.

— The Minnesota Society of Certified Public Accountants serves the public interest by advancing the highest standards of ethics and practice within the CPA profession.

 

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