3rd Quarter 2019

How Snowbirds Can Save on Taxes and Insurance

This is the time of year when many retirees pack up their homes up north and travel to the warm southern states for the winter. In addition to dodging the cold weather, being a long-term snowbird may help you escape your state’s tax bite, too. If you change your state of residence to a state with no or low state income taxes, you could save a bundle. While establishing residency most often requires living in the state for more than half the year, it’s not the only requirement — and state laws and definitions differ.

If you’re weighing such a move, visit the website of the state’s department of revenue to learn the rules to establish domicile in that state. A domicile is basically the place where you intend to remain permanently and return to from your travels, so you’ll need to show that you plan to make the new state your primary home. To prove that, you may need to:

  • Change your driver’s license, car and voter registrations, and address for federal income-tax filings, legal, and financial documents to the new state.
  • File a “declaration of domicile” from the clerk of the circuit court in your county. In certain states, such as Florida, this document attests that you intend to maintain your new residence as your permanent home.
  • Keep good records — even a diary or personal calendar — of where you lived during every day of the year. Travel records, credit card statements, bills, and other receipts may also help prove regular versus seasonal residence, in case your domicile is challenged and audited.

Another note: Snowbirds also should review their homeowners insurance, especially if their house will be vacant during winter or summer storms. Let your insurance company know your schedule, and ask about extra steps you can take to help protect your house while you are gone. For example, a centrally monitored home-security system will allow you to check on your home from a distance, and an interconnected fire alarm system will notify the local police or fire station in an emergency. In addition, hooking up a water-flow sensor, leak-detection device, or low-temperature sensor to your home-security system can automatically cut off the water supply and notify you before pipes freeze or burst — avoiding expensive damages while you’re away. As a bonus, your homeowners insurance company may offer discounts for having these types of systems installed in your home.

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