Column: Guest Column, by Michael Niznik

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. While 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 to Minnesota’s tax laws.

Not surprisingly, states with no income tax, like Florida, or a rate much lower than ours, like Arizona, 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.

Escaping Minnesota winters is one thing; escaping Minnesota’s income tax rate is quite another. For those who 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, here are 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, the issuing state of a 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.

 

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 in another state.

So, with Tax Day right around the corner, it’s important for “snowbirds” and other nonconventional tax-filers to be aware of Minnesota’s complex residency rules. If you’re retired and spending winters basking in the Florida sunshine, that doesn’t mean you’re not stuck in Minnesota for tax purposes.

The more you know, the easier it is to plan for the future, and the less likely you are to fall out of favor with the Minnesota Department of Revenue.

 

Michael Niznik is a CPA with Carlson Advisors, LLP, in Minneapolis.