By Michael T. O'Neil, Esq.
New York Yankee Derek Jeter is having a tough year. After another disappointing postseason, the Yankees Captain has wound up in the middle of a tax dispute with the State of New York. Jeter, who maintains a home in Florida and a home in New York, has claimed for the last several years that he is a Florida resident and not a resident of New York and therefore is not subject to the New York state income tax. New York disagrees and has taken the position that Jeter is in fact a New York resident.
Many professional athletes, including Jeter, have homes in Florida and declare themselves as Florida residents for tax purposes. Florida does not collect a state income tax and therefore individuals that have high income levels, such as professional athletes, can enjoy tax savings of hundreds of thousands of dollars per year by positioning themselves as Florida residents.
As we constantly remind our clients, simply because you own a home in Florida and spend the majority of your time in Florida, that does not make you a Florida resident for tax purposes. Apparently Mr. Jeter did not receive the same advice. This is an issue of concern for all Florida residents that maintain homes outside of Florida. A taxpayer can only become a Florida resident when they are physically present in Florida and intend to make that place home for the indefinite future. There are a number of factors that state taxing authorities will look at when determining where a taxpayer is domiciled. Some of those factors are:
1. How much time is spent in state. Where two homes are maintained, where does the taxpayer spend their time?
2. Is the taxpayer active in clubs, churches and other social activities in state.
3. Where two homes are maintained, which home is furnished more substantially, i.e, does one resemble a cottage and one a mansion?
4. Where two homes are maintained, which home has objects of family or sentimental interest, e.g., heirlooms, precious paintings and family bibles.
5. Which state holds the taxpayer's main bank accounts?
6. Which state is the taxpayer registered to vote in?
7. Which state is listed as the home address for documents and records, e.g., automobile registration, social security records, mailing addresses, mortgages and leases.
8. Which address is listed on the taxpayer's tax returns?
9. In which state did taxpayer execute their wills and trusts?
10. Does the taxpayer own a home in state or merely rent?
Keep in mind that the list is certainly not inclusive, and simply because a taxpayer can satisfy a majority of the items does not mean that the taxpayer is a Florida citizen. Each case is reviewed by the state taxing authority on a case-by-case basis.
In Jeter's case, the State of New York has determined that Derek Jeter is domiciled in New York because although he has a home in Tampa, Florida, Jeter also has an apartment in New York City, he has many personal items that are near and dear to him in his apartment, he has immersed himself in the New York community, has substantial community involvement in jurisdictions other than Florida and has made several public statements regarding his desire to be in New York. As you can see, states can try to classify taxpayers as in-state residents based upon just about anything when there are substantial tax dollars at stake. If successful, New York's claim could reportedly cost Jeter millions of dollars in back taxes.
If you have any questions regarding this article, please contact Michael T. O'Neil at 781.848.5028.