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New York State of Mind: Charitable Giving Implications for Out-of-state Residents and Snowbirds

For tax planning purposes, changes in residency status for snowbirds or those with dual residences can lead to additional scrutiny to determine a taxpayer’s “domicile” (permanent and principal home), but it needn’t mean severing all ties with the place they called home for much of their lives.

Central New York is home to hearty people and hard winters. New York is also home to relatively high income tax rates when compared to other states across the country. Be it weather or wealth planning, there are a number of factors that might incentivize individuals of retirement age to spend the winter months out of state or establish legal residency elsewhere.

New York taxes its residents on income from all sources. On the other hand, nonresidents are only subject to tax on income derived from New York sources. Therefore, an individual who can establish legal residency outside New York will eliminate or at least minimize their exposure to New York tax.

For tax planning purposes, changes in residency status for snowbirds or those with dual residences can lead to additional scrutiny to determine a taxpayer’s “domicile” (permanent and principal home), but it needn’t mean severing all ties with the place they called home for much of their lives.

There are a few main factors used to determine domicile under New York Law:

  • The amount of time spent in New York State during the tax year
  • The extent of a taxpayer’s employment or business connections in New York State
  • Whether or not a taxpayer has family in New York State
  • Whether a taxpayer occupies residential property in New York State
  • Where a taxpayer’s items of personal significance are located

Beyond these five primary factors, tax auditors may also consider factors such as: addresses on financial records, location and registration of automobiles, voter registration and location of safe deposit boxes. Even if a taxpayer is not considered “domiciled” in New York, a snowbird may still be taxed as a New Yorker if they spend more than half the year (or more than 183 days) and maintain a year-round residence in New York.

These complex rules can fuel donor concerns about where they are giving charitably and their first impulse may be to avoid potential confusion by shifting their charitable support out of state. For many donors, this means ceasing donations to organizations they and their family members have supported for decades, and perhaps generations.

Despite the old adage that home is where the heart is, the New York State Department of Taxation and Finance specifically states that a taxpayer “will not be considered a New York State resident just because they donate to a New York-based charity.” In fact, Section 605 of the New York Tax Law clearly states that charitable support and volunteer work “shall not be used in any manner to determine where an individual is domiciled.”

This should come as a welcome reassurance to advisors and their snowbird clients. However, the guidance surrounding charitable donations and residency status is buried deep in audit guides and it remains unclear to what extent the practice of New York State auditors aligns with these guidelines. For those who are inclined to take a “better safe than sorry” approach, continuing to support New York-based charities may seem like a risk.

best of both worlds

It is true you can only have one “domicile” for tax purposes, but donors don’t have to choose when it comes to charitable giving. In 2019, the Community Foundation implemented a solution that allows former residents to maintain their connections with the local charities near and dear to their hearts while also easing any lingering fears about jeopardizing their determination of residency.

Having established a fund with Vanguard Charitable (a national charity with an address in Warwick, RI), the Community Foundation can now accept pass-through donations from out-of-state donors. While this is an unnecessary measure according to New York State tax regulations, it provides an additional layer of separation for former residents who are wary about giving directly to New York-based charities. For the Community Foundation, this fund represents one more tool to help preserve the charitable connections and legacies of those who have lived in and loved Central New York.

For more information on Community Foundation resources for your charitable clients, please contact Praygya Murphy at pmurphy@cnycf.org.

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