Omar Bennett
The concept of 'part-time residence' is often associated with tax residency, which is a legal status that determines which state has the right to tax an individual's income. In the United States, each state has its own rules for determining tax residency, and an individual can qualify for tax residency in multiple states, leading to double taxation. To avoid this, it is essential to understand the specific criteria that define part-time residence in a given state. For instance, in New York, an individual is considered a part-year resident if they meet the definition of a resident or nonresident for only a portion of the year. This could include maintaining a permanent place of abode in the state for a significant part of the year, typically substantially all of the taxable year, and spending a certain number of days in the state, often 183 or 184 days. Similar criteria are used in states like California and Minnesota, where part-year residents are taxed on income from sources within the state.
Characteristics of a Part-Time Residence
| Characteristics | Values |
|---|---|
| Tax residency | Depends on the state; some states have a 183-day rule, while others have different thresholds. |
| New York State | Requires a permanent place of abode for "substantially all of the taxable year" and an 184-day threshold to establish statutory residency. |
| California | Requires filing a California Nonresident or Part-Year Resident Income Tax Return (Form 540NR) to report the California-sourced portion of income. |
| Minnesota | Requires filing a Minnesota return if the state gross income meets the minimum filing requirement ($14,575 for 2024). |
| Non-US citizens | Considered nonresidents of the US for tax purposes unless they meet the green card test or the substantial presence test for the calendar year. |
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What You'll Learn
Part-year residents and non-residents
A part-year resident is someone who has lived in a state for a portion of the tax year. This means that they will have to file a tax return for the period they were a resident and the period they were a non-resident. Each state has its own rules for determining tax residency, and these rules vary.
For example, in New York, you are considered a resident if your domicile (permanent home) is in the state, or if you maintain a permanent place of abode in the state for most of the tax year (substantially all of the taxable year) and spend 184 days or more in the state during that year. Any part of a day counts, and you do not need to be present at your permanent place of abode for the day to count.
California has a similar definition of residency, with some nuances. If you are domiciled in California but are outside the state under an employment-related contract, you may qualify as a non-resident under safe harbor. As a non-resident, you pay tax on your taxable income from California sources. As a part-year resident, you pay tax on all worldwide income while you were a resident of California.
Pennsylvania also recognises the status of part-year residents, who are taxed on all income earned, received, and realised from all sources while they were residents of the state. Part-year residents are also taxed on income from sources within the state when they were not a resident.
Colorado also recognises part-year residents, who must complete the Colorado Individual Income Tax Return (DR 0104) and the Part-Year Resident Tax Calculation Schedule (DR 0104PN) to determine their taxable income.
It is important to understand the specific rules of each state to ensure compliance with tax laws and to avoid double taxation, which can occur when an individual qualifies as a tax resident in more than one state.
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Tax residency status
In the United States, tax residency status is determined by an individual's immigration status and the length of time they have spent in a particular state or country. Foreign nationals are typically classified as either 'non-residents for tax purposes' or 'residents for tax purposes'. To be considered a 'resident for tax purposes', an individual must meet certain criteria, such as having a Green Card or passing the Substantial Presence Test, which requires them to be physically present in the United States for a specified amount of time.
Additionally, each state within the US has its own specific requirements for determining tax residency status. For example, in New York, an individual is considered a resident if they maintain a permanent place of abode in the state for most of the taxable year and spend 184 days or more in the state during that year. Any part of a day counts as a full day, and the place of abode does not need to be owned by the individual. On the other hand, California considers individuals who live in the state for any part of the tax year to be part-year residents, and they are taxed on their worldwide income during their time as a resident.
It is important to note that an individual can be both a non-resident and a resident for US tax purposes during the same tax year, typically during the transition year when they are moving to or from the United States. In such cases, they are considered Dual-Status Taxpayers and must file two separate tax returns for the year.
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Tax residency rules
In the US, each state has its own rules for determining tax residency, which can lead to double taxation if an individual qualifies as a tax resident in multiple states. For example, New York State considers an individual a resident if they have a permanent place of abode for "substantially all of the taxable year" and meet a 184-day threshold. New York also includes partial days in its calculation, unlike other states such as New Mexico, which only counts full 24-hour days.
If an individual qualifies as a resident in multiple states, they may be able to reduce their tax burden by establishing tax residency in the lower-tax state. However, they must be prepared to prove their residency in an audit, as the higher-tax state may still try to claim the right to tax their income. To avoid double taxation, it is important to understand the tax residency rules of each state and establish a new domicile as soon as possible after moving.
In addition to domicile and statutory residency, other factors that may determine tax residency include income source and employment status. For example, California considers individuals who are domiciled in the state but working under an employment contract in another state as non-residents under safe harbor. Remote workers may also face additional tax challenges, including double taxation, if their employer is in a state with "convenience of the employer" rules.
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Temporary absence
In the United States, your domicile refers to your permanent home or the place you intend to return to after any temporary absences. You are considered a resident of a state for tax purposes if you are domiciled there or meet its statutory residency test. Statutory residency typically means you spend a certain amount of time in a given year in that state, such as 183 days.
Some states have different thresholds for statutory residency. For example, New York includes partial days in its calculation, while New Mexico only counts full 24-hour days. Additionally, place of abode clauses sometimes apply, requiring you to maintain a permanent place of abode in the state for a duration.
If you are a resident of a state for only a portion of the year, your income subject to tax will be split. Part of your income will be taxed according to resident rules, and the remainder will be subject to nonresident rules.
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Tax liability
The tax liability of a part-time residence depends on the state. In the United States, domicile location and statutory residency are the two primary factors that determine tax residency. Domicile refers to a permanent home, defined as the place one intends to return to after any temporary absence. Statutory residency, on the other hand, is based on the number of days spent in a given year in a particular state, typically 183 days, though this varies by state.
For example, in California, a part-year resident is someone who lived inside or outside of California during the tax year. As a part-year resident, you pay tax on all worldwide income while you were a resident of California. Nonresidents pay tax on their taxable income from California sources.
In New York, a part-year resident is someone who was a resident for only a portion of the year. Their income subject to tax will be split, with part taxed according to resident rules and the remainder subject to nonresident rules. New York State residents pay state tax (and city tax if a New York City or Yonkers resident) on all their income no matter where it is earned. Nonresidents pay tax on New York source income, which includes earnings from work performed in New York State, and income from real property located in the state.
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Frequently asked questions
A part-time residence is a place where an individual lives for only a portion of the year.
Establishing a part-time residence depends on the state. For example, in California, you are considered a part-time resident if you lived in the state for only a portion of the year. In Minnesota, you are considered a part-time resident if you moved to or from the state during the tax year and established residency, or if you spent at least 183 days in the state during the year and rented, owned, occupied, or maintained an abode.
If you are a part-time resident, you will need to file a tax return for the state where you are a part-time resident. The amount of tax you pay will depend on the state. For example, in California, you pay tax on all worldwide income while you were a resident of the state. In New York, you first calculate your tax as if you were a full-year resident, then determine how much to allocate to New York by an income percentage based on your New York source income and your federal income.
