Both retired and now want to be snowbirds but have a few of questions?

Question

My wife and I currently live in VA, we are both retired, I have SS and she has CSRS we recently bought a house in Cape Coral Florida. We want to take advantage of the Homestead which will save us $1,000.00 per year in Real Estate Taxes because we plan on being there more than six months out of the year. However we have questions about filing federal and state tax returns. If my wife becomes a FL resident we can save on state taxes as well from her retirement. This would be more beneficial for us but are concerned that Virginia state may audit because of the value of the property we own in Virginia against my husband social security income? We own two homes in VA, one is over 1mil in value and the other is rental property. Can we still file a joint federal return if we claim residence in two different states? What address would we use to file our Federal Return?

Answer 1

According to the Commonwealth of Virginia Department of Taxation, you're required to file tax return in Virginia if you're either a Virginia resident or have a Virginia source of income.

Home value has nothing to do with it, having a home however does. If you don't convert your Virginia primary residence to a rental while you're in Florida, VA may consider you residents even if you stay in Florida for more than 183 days.

Resident: -- A person who lives in Virginia, or maintains a place of abode here, for more than 183 days during the year, or who is a legal (domiciliary) resident of the Commonwealth is considered a Virginia resident for income tax purposes. Residents file Form 760.

You can still file a joint Federal tax return even if you file separately State because of the residency issues. However I can't see how you would have different residencies. Is the home in VA owned by only one spouse? Even then, VA would claim that it's the place of abode for both of you, making both of you residents...

You might want to read the "Mixed Residency" text on the web page, and see if it applies to you.

Answer 2

You need to establish residency in another state.

That means make your life revolve around that new state. Register the cars in the new state, and keep them there unless you drive one to the old state when vacationing; register to vote in the new state; have your credit card and other regular correspondence switched to the new state; close your bank account in the old state and open new one in the new state.

Your biggest problem will be the rental property. That will be income generated in the old state. You will have to file a non-resident tax form in the old state because you are generating income there.

Having a home you seldom visit except when vacationing will not make you a resident of the state. Keep records on which dates you are in which state. Don't make it close to being a 50/50 split because one small mistake could cause Virginia to claim you a a resident.

Of course the first year of the switch you will have to file a part year resident form with both states unless the switch happens near the start or the end of the year. Most states ignore a period of less than 1/2 a month of residency.