Tax Tips for Ohio Snowbirds
Ohio is a wonderful place to live, but Ohio winters can be a little tough to take. That’s why over 50,000 Ohioans spend more than a month each year in Florida—and many spend much longer. In fact, more snowbirds come from Ohio than any other state besides New York and Michigan. Unfortunately, many people flee Ohio’s snow only to face a storm of tax troubles when they return come spring.
How do snowbirds file taxes? Do snowbirds file two state tax returns? Do they get to prorate their taxes based on the amount of time they live in each state? Or are they considered residents of one state or the other for tax purposes? Read on to learn about snowbird tax rules.
Snowbird Tax Rules: The Question of Residency
Florida offers more than just beautiful weather; the state also has no state income tax for individuals, making Florida residency even more desirable. What does it mean to be a resident of a state for tax purposes? Each state has its own criteria to determine whether someone is a resident.
In general, what you do is more important than what you say when it comes to residency. You can declare yourself a Florida resident all day long, but taxing authorities are going to look at the facts. Some of the most important facts determining your residency are where you spend most of your time and where you appear to have established a home.
According to the Florida Department of Revenue, you are a resident for tax purposes “when your true, fixed, and permanent home is in Florida.” There is no fixed number of days that you must be present in Florida to be considered a Florida resident for tax purposes, but there are actions you can take to establish that Florida is your (new) home.
To establish yourself as a Florida resident, do the things people typically do when they settle down in a new place. Filing a declaration of domicile, registering to vote, and qualifying for a homestead exemption in Florida all support a finding that you are a Florida resident. (Getting a Florida driver’s license, on the other hand, is considered evidence of intent to establish residency, but not proof of residency in and of itself.) All of those actions make it more likely that Florida will be seen as your domicile—the legal term for a permanent residence to which you plan to return when you are away.
Unfortunately, even if the state of Florida is satisfied that you are a Florida resident, the state of Ohio may not be. Ohio understands that many people prefer to spend the winters—or longer—in warmer weather. But that doesn’t mean that the state is willing to sacrifice tax revenue because some snowbirds choose to fly south.
How Ohio Determines Residency for Tax Purposes
Ohio has its own ideas about whether you are a resident or not. In Ohio, you are considered a resident for income tax purposes if you are domiciled in the state, which means that you have an abode—a house, condo, apartment, or other residence—in Ohio, whether you own or rent. A temporary absence from this abode, no matter where you go or how long you are away, does not change your residency status.
In other words, if you have a home in Ohio, the state presumes that Ohio is your home. Ohio does allow you a credit against your Ohio income tax for any non-Ohio income for which you owed and paid tax in another state.
That won’t help you much if you’re a Florida snowbird, though, because Florida doesn’t have a state income tax. However, if you earned income in a state other than Florida that does have an income tax, it’s important to keep good records so that you can claim that credit on your Ohio taxes.
The Ohio Department of Taxation also presumes you to be an Ohio resident if you have more than 183 “contact periods” in Ohio each year, although you may be able to present evidence to rebut that presumption.
Important Tax Considerations for Snowbirds
If you own homes in both Ohio and Florida or another state, you are allowed to deduct mortgage interest from both your primary and secondary residences on your income tax, although there is an overall cap of $1 million on deductible mortgage debt.
If you do own two homes, perhaps you’ve considered renting out one while you’re using the other. That’s a practical approach, but be aware that it carries tax implications. Renting out your home for more than two weeks during the year makes you a landlord in the eyes of the IRS. While that does allow you to deduct some expenses such as maintenance and repairs, it also requires you to report your rental income on your taxes. Just how much you can deduct for a rental property depends on the percentage of time you live in the home versus renting it out.
The Bottom Line
Living in two different states can lead to tax headaches unless you keep good records and have competent tax advisors. To learn more about snowbird tax rules if you winter in Florida or another warm-weather state, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.