Residency vs Property Ownership

[RickO]

We full time and are domiciled in Texas as Escapee members. We travel a lot but our grandbabies are in Arizona and so we spend a good deal of time here.

Lately, we've been thinking that we might want to purchase a townhouse here in Arizona to stay while we're in town rather than staying in the coach.

The immediate question that comes to mind is one of domicile. Although we will only be here in Arizona 5 month per year or so, we could change our domicile from Texas to Arizona. However, Arizona income and vehicle registration taxes are nearly as high as California and a quick forecast reveals it would cost us >$500/month in these taxes just to change domicile. My reading of the Arizona law on the topic (http://www.azdor.gov/LinkClick.aspx?...id=106&mid=487) seems to say that one can be in the state up to nine months per year without being considered a resident but many other factors can come into play.

I'm wondering if any other members have faced this kind of situation and what you've done about it. I know many people own homes in Arizona for snowbirding but are residents of other states but this is a little different twist.

Any insights are welcome.

Thanks

Rick

[bdpreece]

You need to talk to an Arizona lawyer. My personal take would be that since you do not own property anywhere else you would immediately become Arizona residents as soon as you purchased the town house. How about putting the townhouse in the kids name?

[InPursuit]

Does AZ have a "homestead" property tax benefit?

[RickO]

Thanks guys... I haven't even checked in with my tax guy yet so there's a lot of homework left to do for sure but thought I'd take a chance and see if anyone here had gone through a similar situation.

InPursuit, not quite sure what you're asking with the "Homestead Property Tax Benefit" but I think the answer is yes. Here's a link to it Homestead Exemption Laws

Rick

[DonnaB]

Consider just renting an apartment for the time you are there. We have friends that rent for a couple of months in Denver then a couple of months in Austin during the year as they have kids in both places. They rent corporate housing which is an apartment that comes fully furnished with dishes, linens, pots & pans, even a nice bedspread and decor items. Then you don't have to be concerned about the residency issue and you don't have property in a place where the kids could move.

[Jim2]

Just owning property does not make you a resident. Its living in the property for an extended duration that makes you a resident. Whether you own or rent has little to do with establishing residency. Each state is slightly different, some make you a resident in 3 months, some in 6 months. Thats assuming you're not employed, if you take a paid job in the state, the residency is triggered much quicker.
You or your lawyer, need to review the specific details of Az residency laws.
I am domiciled in SD, but own properties in 3 states and very careful to keep my stays well under the residency trigger of each.

[Dadeaux]

If ownership is a problem create an LLC and put the property in it.

[RickO]

Quote:

Originally Posted by DonnaB Consider just renting an apartment for the time you are there. We have friends that rent for a couple of months in Denver then a couple of months in Austin during the year as they have kids in both places. They rent corporate housing which is an apartment that comes fully furnished with dishes, linens, pots & pans, even a nice bedspread and decor items. Then you don't have to be concerned about the residency issue and you don't have property in a place where the kids could move.

Thanks Donna but my question is really not about the benefits of renting vs buying. We have three dogs which makes renting difficult... don't like sleeping in other people's beds... and we're interested in a very specific location as an intermediate and longer term landing spot for us even after we hang up our keys.

Quote:

Originally Posted by Jim2 Just owning property does not make you a resident. Its living in the property for an extended duration that makes you a resident. Whether you own or rent has little to do with establishing residency. Each state is slightly different, some make you a resident in 3 months, some in 6 months. Thats assuming you're not employed, if you take a paid job in the state, the residency is triggered much quicker. You or your lawyer, need to review the specific details of Az residency laws. I am domiciled in SD, but own properties in 3 states and very careful to keep my stays well under the residency trigger of each.

I think you're exactly right. The link I attached outlines Arizona's tax laws with this regard and it seems that they allow up to nine months of residence before you have to declare yourself a resident but we're only looking for about six months. But, it'll be off to the tax guy and money planner for me so I make sure we stay on the right side of the law.

Thanks again...

Rick

[Midniteoyl]

Quote:

Resident Definition State law requires that you obtain an Arizona vehicle registration and driver license, immediately if any of the following applies. If you: Work in Arizona (other than for seasonal agricultural work) –or– Are registered to vote in Arizona –or– Place children in school without paying the tuition rate of a nonresident –or– Have a business that has an office in Arizona, and that bases and operates vehicles in this state –or– Obtain a state license or pay school tuition fees at the same rate as an Arizona resident –or– Have a business that operates vehicles to transport goods or passengers within Arizona –or– Remain in Arizona for a total of 7 months or more during any calendar year, regardless of your permanent residence. Out-of-state students enrolled with 7 or more semester hours, are not considered Arizona residents, regardless of employment. Active duty military personnel based in Arizona who qualify for exemption under the Service Members Civil Relief Act of 2003 are not considered Arizona residents.

Motor Vehicle Division

Quote:

A.R.S. § 43-104 defines the terms "resident" and "nonresident" for income tax purposes. The term "resident" includes: (a) Every individual who is in Arizona for other than a temporary or transitory purpose. (b) Every individual domiciled in Arizona who is outside Arizona for a temporary or transitory purpose. Any individual who is a resident of Arizona continues to be a resident even though temporarily absent from Arizona. (c) Every individual who spends, in the aggregate, more than nine months of the taxable year within Arizona is presumed to be a resident. The presumption may be overcome by competent evidence that the individual is in the state for a temporary or transitory purpose. -------------------------------------------- For Arizona income tax purposes, A.R.S. § 43-104 defines the term "nonresident" to mean every individual other than a resident. A.R.S. § 43-104 also defines the term "resident." This section provides that every individual who is in the state for other than a temporary or transitory purpose is a resident. There is also a presumption under Arizona law that every individual who spends, in the aggregate, more than nine months of the taxable year within the state is a resident. This presumption may be overcome by competent evidence that the individual is in the state for a temporary or transitory purpose. Arizona statutes do not define the terms "temporary" and "transitory." Arizona law further states that an individual who is domiciled in Arizona continues to be a resident even though temporarily absent from the state. Generally, domicile is the place where an individual has his true, fixed, permanent home and principal establishment and to which he has the intention of returning whenever he is absent. The term "permanent" describes that which is not merely "temporary," or a dwelling which there is no present existing intent to give up. Generally, domicile is presumed to follow residence. However, actual residence is only one circumstance and, therefore, this presumption is not conclusive. Domicile, once established, is presumed to continue until change is shown. The burden of proof to rebut this presumption is on the person contending to the contrary. A new residence or domicile can be acquired only by the concurrence of an intention to establish a new residence or domicile and acts evidencing such an intention. An individual may be domiciled in another state but be a resident of Arizona for income tax purposes. In order for an individual to determine whether or not he or she is an Arizona resident for income tax purposes, the statutory definitions contained in A.R.S. § 43-104 must be applied to each individual case. Therefore, the purpose and intent of an individual's presence in or absence from Arizona, as evidenced by factual circumstances, must be examined to obtain criteria upon which to base a determination. Examples of actions which are considered in determining a person's residency are: file:///D|/Temp/itp92-1.htm (2 of 3)9/4/2009 10:53:49 AM itp 92-1 (1) physical presence of an individual, and his or her spouse and children, if any, in the new locality; (2) registration of an automobile; (3) application for a driver's license or renewing or relinquishing an old one; (4) location of bank accounts and business connections; (5) purchase of a home and/or sale of an old home; (6) payment of personal or real property taxes; (7) payment of state income taxes; (8) registering to vote in the location of the new domicile and notifying voter registration officials in the old locality of such change of domicile; (9) consistent use of new permanent address on all appropriate records and correspondence.

http://www.azdor.gov/LinkClick.aspx?...id=106&mid=487

So, 7 months for a drivers license, but 9 months for taxes.. unless that is your 'home'... you have to prove it is not.

[Vegasdan]

Given the current debt burden on many states and, in this case, Arizona, expect changes in these laws in the future.

[RickO]

No doubt Dan. I can foresee problems as states change their rules too. It will be interesting when inconsistent rules between states result in more than one state trying to claim the same individual as residents of their states.

rick