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Old 10-12-2018, 09:37 AM   #1
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Maintaining Maryland Residency while Full Timing

So, I currently own a home in MD and the wife and I are planning to put the house on the market and go FT in the spring. Initially, we we figured we'd change our residency to FL to make life easy and lower our tax burden.

That is until this morning when I discovered that if I did that, I'd take a serious pay cut from my employer. I'd forgotten that my because my employer's workforce is about 50% remote, they provide locality pay to those living in high cost areas. That is, You get a % increase in your base pay if you live in a high cost area. It's based on GSA rates, even though I don't work for the government. I figure they just use GSA Rates because its easier.

Anyway, living in Maryland my locality pay increase is a whopping 28%. If I changed my residency to FL, that would drop down to 15%. So I'd be taking a 13% haircut. Texas would drop me down to 16% and SD would eliminate the locality pay completely (I'd only get basepay with no adjustment for locality pay).
Before anyone gets any clever ideas like trying to declare residency in NYC or SF to get the biggest locality pay - it doesn't work like that. Your locality pay rate is determined by your place of residence at time of hire. You can move to a location with a lower cost of living without approval and take the decrease in locality pay. You can move to a higher cost of living area without approval as well, but your management has to approve an increase in your locality pay. Otherwise, if you moved to a higher cost area you only get what your previous rate was. So if I tried to move from MD to San Francisco where the locality rate is a crazy 40%, I'd continue to only get the MD rate of 28% unless I asked and my management approved an adjustment to get the SF rate - which they ain't gonna do unless they asked me to move there. All in all, its a fair policy imo.
I've not done the math but I doubt that the elimination of State Income or Sales Tax would offset the loss here. So while I crunch these numbers, I'm wondering if there are any full timers out there that maintain residency in MD without actually being there.

I've looked for mail services that provide MD addresses and haven't found one. I also don't have any family in MD whose address I could use. We do have friends but I'd hate to burden them with it, especially given that we probably won't see them very often once we go FT.

So, any full timers out there with MD Residency that know a trick to establish or maintain residency when you don't own or rent a spot in MD?
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Old 10-15-2018, 02:35 PM   #2
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Dang. No takers, huh?

Well, fwiw to others, I did a little more research and it looks like there are a couple of mailing services in NoVA that provide a physical street address. That would keep my locality pay the same and also have the added advantage of not requiring any special license. Now I have to determine what hoops I'd have to jump through in VA to establish residency.
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Old 10-15-2018, 02:50 PM   #3
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Kind of obvious....but did you check how much you paid in MD state income tax? Then you can see whether the pay cut would be more than the income loss. I'd be careful about having a mail forwarding service providing you a mailing address that you would use as a residence address for your employer....I think it could lead to some big problems if the employer finds out.
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Old 10-15-2018, 03:04 PM   #4
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Also remember to sell your house before you change Driver Lic. If you have out of state DL Maryland will charge you sales tax on sale of home. We had moved to WV before sale , but still had MD DL which was good enough to prevent sales tax charge.
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Old 10-15-2018, 03:15 PM   #5
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Quote:
Originally Posted by scbwr View Post
Kind of obvious....but did you check how much you paid in MD state income tax? Then you can see whether the pay cut would be more than the income loss.
its on the list of maths to be done

Quote:
I'd be careful about having a mail forwarding service providing you a mailing address that you would use as a residence address for your employer....I think it could lead to some big problems if the employer finds out.
Spoke to my manager about this already. Over 50% of our workforce is remote. We have people in every state. He doesn't care. I just have to adjust my schedule to the home office timezone (central) and an increase in locality pay has zero chance of happening.

Good advice for others that work for smaller companies though. There are some fairly complex tax implications. Smaller companies often aren't setup to handle it.
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Old 10-15-2018, 03:16 PM   #6
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I would also discuss your plans with your employer if you have not already done so. You don't want them setting up a meeting in MD when you are on TX. Not telling them and having them find out would probably be grounds for termination.
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Old 10-15-2018, 03:19 PM   #7
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Also remember to sell your house before you change Driver Lic. If you have out of state DL Maryland will charge you sales tax on sale of home. We had moved to WV before sale , but still had MD DL which was good enough to prevent sales tax charge.
Oh. My. GAWD! That is such an awesome idea!!!! Will def change residency before closing.
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