Would you like to spend your winters in a warm place like Florida and your summers in a cool climate such as Vermont? Have you ever wondered how state income taxes work in such a situation?

If you live in more than one state, your residential circumstances affect only your state taxes, not federal taxes. The IRS doesn't care where you live as long as you keep sending them money.

State of Residence

Your state of residence is the primary factor that determines where you owe income taxes. Most states define a resident as anyone who resides in the state for more than half a year. There are exceptions for members of the military and those receiving medical treatments.

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The income tax rate in Vermont varies from 3.5 percent to 9.5 percent depending on income. There is no state income tax in Florida. If you lived in these two states, which would you claim as your state of residence?

How Will I Know?

How will they know how much time you spend in each state? Half a year is 182.5 days, so wherever you spend 183 days or more is your state of residence. If you are a non-resident property owner in a state that has an income tax, you can bet that they are going to want to see proof that you lived somewhere else for the majority of the year.

There are a number of factors that states look at when verifying residency. First and foremost is the state that issued your driver’s license and voter registration card. Other factors include your employer's location, business and social connections such as serving on a board or participating in a church, hunting/fishing permits, bank and credit card statements, electronic toll records, and the location of your doctors/dentists/accountants/attorneys.

It works on an audit basis similar to federal income taxes. Each year states with income taxes select a sample of non-resident property owners to audit. You never know when you might be audited so everything has to be on the up-and-up.

The Last Word

There is also such a thing as non-resident state income taxes. Non-resident state income taxes are levied against people who live in one state and work in another. Those lucky individuals get to file tax returns in both states, but their income is not doubled-taxed.

You can only live in one place at a time so owning a second home results in doubling your mortgage payments, property taxes, and utilities. If that doesn’t concern you, it's as close to having perfect year-round weather as you can get. There's also the possibility of rentng out one or both places. You might want to check out our article entitled Top Considerations for Becoming an Airbnb Host.

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