When one is involved in home purchases in more than one state, it is crucial that they are given the correct tax knowledge. Contacting an accounting firm that specializes in this area, is one way to get this done. Since tax laws are quite varied depending on what state one lives in, it is often the case that where one buys a second home will not have the same laws as where their primary home is.
The question one has to ask, as noted by accounting firm Anchin, Block & Anchin – the firm based in New York which, according to ‘Inside Public Accounting’ has been named one of the "Best of the Best" Top 25 Firms in the United States – is whether or not one is a real bona fide resident of the state where they are purchasing their second home.
When it comes to tax law, if one is a state resident of where their new home purchase is, as Anchin notes, they will be expected to pay income tax there rather than from their prior home state. Indeed, as executive partner of Anchin, Block & Anchin, Clarence Kehoe points out, really, one needs “to seek professional advice when figuring this out because each state varies and it’s really complicated.”
Basically it is important to get a grasp of two main tenets: how to enact residency in the new state and thereafter what is needed to annul residency in the prior home state? Enacting new residency requires one live in that place for more than six months of the year, although as Kehoe notes, this rule is not so straightforward. As he notes, “breaking residency in your home state can be much more complicated.” Taking the example of New York he explains, “first they look at your days spent in New York and whether you maintain a permanent place of abode there; then they will also look at what your ‘intent’ is—is your new home really your permanent residence?” For this to be figured out, the executive from Anchin Block says that other details will be investigated like where most of one’s family business and social connections are; where one visits doctors; etc. He adds, “New York has recognized that people who say they move to Florida really are still New Yorkers. They raise tens of millions of dollars auditing people on this.” Given that New York is not alone in this, it is important to seek advice from professionals.