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The COVID-19 Effect on State/City Personal Income Taxes

Recently, The New York Times published an article entitled When Sheltering in Place Puts Your Tax Strategy at Risk (May 15, 2020). The article was timely, relevant, and important to many people who were considering changing their state/city tax situation pre-COVID or, because of COVID, are now questioning their current living situation and the amount of state and city taxes they pay.

The article bounced around between important state concepts such as domicile, statutory residency, and state-sourced income for a nonresident. Without having a good understanding of each concept, or being advised by a tax professional that specializes in this area, readers could easily come away from reading the article not truly understanding what it takes to change one’s residency for state tax purposes.



The terms “domicile” and “residence” are often used synonymously. However, for state tax purposes, the two terms have distinctly different meanings.

The term “domicile” equates to the location of one’s true home. Thus, a taxpayer can only have one domicile at a time. Once an individual establishes a domicile, that location will remain his/her domicile until the person can show with “clear and convincing evidence” he/she intended to both give up their old domicile and establish a new domicile. It is important to note that “giving up one’s old domicile” does NOT require the sale of the person’s home in the old domicile state.

When determining whether a change of domicile has occurred, states typically look to a person’s intent. Many state tax departments and courts look to five factors when determining a person’s "intent" to change domicile. These factors include:

  • Home - The size, value, and use of the old domicile home as compared with the nature and use patterns of the new domicile residence.

  • Active Business Involvement – The location of a taxpayer’s continued employment or active participation in a business whether in the new or old domicile.

  • Time - The location where an individual spends the majority of his/her time.

  • Items “Near and Dear” - The location of items which have significant sentimental and/or monetary value to the person.

  • Family Connections - The location of family members. 

There are many simple things a taxpayer can do to document their intention to change his/her domicile, such as:

  • Changing driver’s license to new state.
  • Re-registering cars in new state.
  • Changing state of domicile on important personal documents (e.g., will, trusts, etc.).
  • Getting a doctor and dentist in new state.
  • Having all mail sent to new state.

A typical “change of domicile” checklist has about 20-25 items on it. Given the checklist items are typically easy to accomplish, these actions are not viewed as being as significant as the five factors when evaluating a domicile change. Having said that, not doing the checklist items can make a challenge by the state of old domicile much harder to defend.

Statutory Residency

Most states consider an individual who is domiciled in another state to be a “statutory resident” for income tax purposes (which means subject to tax on one’s worldwide income as if domiciled in the state) if the individual:

  • Maintains a permanent place of abode in the state; and
  • Spends 184 days or more in the state during the tax year.

Two additional considerations taxpayers need to understand with respect to statutory residency are:

  1. Taxpayers are considered statutory residents for an entire tax year if the person meets the 184-day test at any point in the tax year; and
  2. Any time spent in a location is considered a “day” for purposes of the 184-day statutory residence test.


A person who is neither a domiciliary nor a statutory resident is classified as a nonresident. Nonresidents are only subject to tax on income earned in the state. Examples of income “earned” in a nonresident state can include (but not limited to):

  • Rental income from owning tangible property in the state;
  • Income from carrying on a business in the state;
  • Flow-through income from ownership stakes in an S corporation, a partnership, or a limited liability company taxed as a partnership that does business in the state; and
  • Wages and other compensation from working in a state as an employee.

Potential COVID-19 Domicile/Residency Considerations

The first step in evaluating a change in one’s domicile is to ascertain the location of the person’s current domicile. As previously noted, a person can only have one domicile at a time and once a domicile is established it remains as such until the individual can show with clear and convincing evidence that both their intent and actions indicate giving up the old domicile and establishing a new one.

The following examples show how the domicile rules may apply in our current COVID-19 environment.

Example One:

In response to a “Stay-At-Home order,” Jane leaves her New York City apartment on March 1, 2020 and moves into her much larger vacation home in East Hampton, New York. Jane continues to work remotely for her New York City-based company. Jane does not intend to move back to her New York City apartment until a vaccine is introduced and the pandemic is under control. She wants to avoid paying New York City personal income tax on her 2020 income but is not willing to give up her apartment.


  • If Jane’s living and working situation significantly returns to her pre-COVID life (within the next 18-24 months, although there is no defined length of time) it is unlikely she will be successful in claiming she changed her domicile from New York City to East Hampton regardless of actions taken including (but not limited to):
    • Getting a new driver’s license showing East Hampton address.
    • Registering her car in East Hampton.
    • Voting in East Hampton.
    • Changing her will to reflect East Hampton as her domicile.
    • Getting an East Hampton doctor.

  • On the other hand, she should be successful in changing her domicile from New York City to East Hampton if her living and working situation significantly changes from her pre-COVID life (once the current COVID situation subsides). For example, she:
    • Is no longer assigned to her NYC office.
    • Works on Long Island.
    • Spends significantly more time in East Hampton than in New York City.
    • Documents how the five factors are weighted toward East Hampton and no longer toward New York City.

Example Two:

Joe, his spouse, and their children left their New York State home on March 1, 2020 due to COVID and moved into their Miami home. Their Miami home is similar in size to their home in New York. Joe wants to become a Florida domiciliary but also maintain his existing home in New York.


  • If Joe remains in Florida for at least two years once the pandemic is over and his children attend school in Florida during this timeframe, the New York State Department of Tax is more likely to agree there was a change in domicile.
  • If, like in the previous example where Jane’s living and working situation significantly returns to pre-COVID life (within the next 18 to 24 months), it is unlikely Joe will be successful in defending his domicile change to Florida.
  • Joe should carefully document steps taken with respect to the five factors. This can include:
    • Home: While selling your home in the old domicile is not required, it is difficult for a state to claim it remains your domicile when you do not have a home to return to. Putting the home on the market for sale or rent can lend support to this factor.
    • Active Business Involvement: Amended employment contract changing primary work location from New York State to Florida. If Joe’s employer does not already have a Florida office and is unwilling or unable to create one, setting up a bona fide home office is a secondary solution.
    • Time Spent: Joe should spend significantly more time in Florida than New York. Simply spending fifteen more days in the new state of domicile than he spends in the old domicile is often deemed insufficient to prove a change.
    • Items Near and Dear: Moving bills and updated itemized insurance policies showing Joe moved such items from New York to Florida support this change.
    • Family Connections: Joe’s immediate family has also moved to Florida. Documentation of family events and holidays spent in Florida can strengthen one’s domicile change.
  • Assuming Joe maintains his New York home, he should be careful to spend less than 184 days in the state so as not to be deemed a New York statutory resident.
  • Joe should file a New York part-year resident return. All income earned prior to March 1, 2020 should be subject to New York State personal income tax.
  • Assuming Joe successfully claims a change in domicile, for the period of non-residency (post-March 1, 2020) he should be subject to New York tax on income earned in the state.

Key Takeaways

It is critical that before a taxpayer undertakes the process of changing domicile that he/she has a clear understanding of the domicile and statutory residency rules in the jurisdiction they currently reside in. In addition:

  • The “old” state of domicile will most likely audit the taxpayer’s claim of a change in domicile.
  • Given the high likelihood of an audit, taxpayers must carefully plan, execute, and document the actions taken (i.e., five factors) in changing domicile.
  • Moves to vacation homes that are temporary in nature (i.e., intended to last only as long as the pandemic does) do not make for strong cases in changing one’s domicile.

Finally, given the significant financial drain the COVID-19 pandemic has had on states and cities, it is expected these jurisdictions will put an increased effort into identifying taxpayers that claimed a change in residency during 2020 and 2021. Given this likelihood, the historical high standards a taxpayer faced in proving a change in domicile (i.e., “clear and convincing evidence”) most likely just got higher.

About the Authors

David Seiden is a partner and practice leader for Citrin Cooperman’s State and Local Tax Practice and can be reached at or 212-225-9505. Eugene Ruvere, is a State and Local Tax Practice partner in Citrin Cooperman’s White Plains office and can be reached at or 914-949-2990. Rena Genauer, is a State and Local Tax Practice manager, in Citrin Cooperman’s New York office and can be reached at or 212-225-9551.

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