Changing your Residency to Florida and the Presumption of Continuing Legal Residence

Georgia borders Florida and Tennessee – states that do not tax personal income. Longtime legal residents of Georgia who hope to change their legal residence to Florida or Tennessee must understand how to change legal residency (domicile). A taxpayer who wants to move to Florida or Tennessee but continue to travel back and forth to Georgia cannot and should not assume that he or she has changed his or her legal residence by simply buying a home in Florida or Tennessee and taking other minimal steps to establish domicile in those states. The longtime Georgia legal resident faces an oft-overlooked hurdle: the “presumption of continuing legal residence” – a little-known rule that can destroy the taxpayer’s intent and plan to carve out passive income from the Georgia income tax base.

For purposes of this article, we assume that the taxpayer seeks to change his or her domicile to Florida, but the rules apply equally to Tennessee.  In a typical scenario, the longtime Georgia legal resident wants to shield passive income (interest, dividends, rental income) from Georgia income tax.  The taxpayer buys a home in Florida, registers to vote in Florida, gets a Florida driver’s license and gets Florida license plate for his car.  The taxpayer believes that he can continue traveling back and forth to Georgia (perhaps for a job) as long as he does not exceed 183 days per year. The taxpayer understands that he must report to Georgia all income from the work or business conducted in Georgia.  The taxpayer files a Georgia income tax return (as a nonresident) but includes only the income from Georgia activity or work.  The taxpayer excludes passive income (dividends, interest income, gains on dispositions of stock).  The taxpayer believes that h or she can shield passive income from Georgia tax because he has stayed outside Georgia for at least 183 days or part-days.  Unfortunately, the taxpayer does not realize that the often misunderstood 183-day rule does not apply to him or her and that he must overcome the “presumption of continuing legal residence.”

The 183-day rule allows Georgia to tax 100% of the income of an individual who is not a “legal resident” of Georgia but who is in Georgia for 183-days or part days. Under the 183-day rule, the taxpayer may not own a home in Georgia.  But the taxpayer is subject to Georgia tax on 100% of his or her income because he or she is physically present in Georgia for 183 days or part-days during the prior year.

A legal resident of Georgia cannot rely on the 183-day rule to shield passive income from Georgia tax by (1) moving to Florida, (2) continuing to earn Georgia income, (3) paying Georgia income tax only on the Georgia-sourced income, or (4) excluding from the Georgia tax base all passive income (or any other income not earned in Georgia). The taxpayer must still overcome the “presumption of continuing legal residence,” under which 100% of the taxpayer’s income remains subject to Georgia tax.  The taxpayer can overcome the presumption by showing that he (1) abandoned his Georgia domicile, and (2) established a new domicile in Florida, through physical presence coupled with an intent to remain in Florida indefinitely. But the taxpayer cannot travel back and forth to Georgia several times during the year (even if less than 183 days).  This activity raises suspicion that the taxpayer never abandoned his Georgia legal residence.

“Residency” for state income tax purposes is complicated and fact-intensive.  Indeed, the Georgia Department of Revenue does not issue written letter rulings on residency issues.

A taxpayer who at any time is a “legal resident” of Georgia, and is thus subject to tax on 100% of his or her income, continues to be a “legal resident” until proving otherwise.  A taxpayer who has relied on the 183-day rule and has failed to report 100% of his or her income to Georgia can minimize the damage by coming forward through a voluntary disclosure to the Georgia Department of Revenue to limit exposure and penalties (criminal and civil).  This option is not available to every taxpayer, so the taxpayer should consult a state tax attorney about the best course of action.

Litwin Law represents individuals in state and local tax matters. Litwin Law deals with a variety of issues that arise during audit and during protest and appeal to the Georgia Tax Tribunal. If you or your client faces a sales tax issue or other audit issue, and you are unable to resolve the issue, Litwin Law can help.

For over 30 years, and as a recognized Super Lawyer since 2008, Richard Litwin has devoted his practice to multistate tax, state and local tax, and tax controversies. He has chaired the State Bar of Georgia’s Section of Taxation and is highly active on Georgia Department of Revenue committees.

Note: “Pass the SALT” is a blog of The Litwin Law Firm, P.C., d/b/a Litwin Law, and is dedicated to sharing views and ideas on state and local taxation. This document is an overview and summary of state and local tax obligations. This document is not intended to be, nor should be interpreted as, legal advice. For legal advice, the reader should contact an attorney.