Discussion:First Time Homebuyer Credit Domicile
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Discussion Forum Index --> Tax Questions --> First Time Homebuyer Credit Domicile
| 8 February 2010 | |
| I have a client who is in the military and has been a FL. resident for years. All his income is on a "Florida" W2. He purchased a home in 2009 in Massachusetts. In order to claim the first time homebuyer credit, you are declaring your new home as your place of legal residence. Because of this, I believe he has established a new legal domicile in Massachusetts. Is his Florida income now subject to Massachusetts taxes?? | |
| 8 February 2010 | |
| If he worked in Florida before moving to Massachusetts, I do not see why his income should be taxable in Massachusetts. | |
| 8 February 2010 | |
| Only that portion earned while living in Massachusetts will taxable to MA this year (November and December). But next year, since he has claimed a new legal principal home in MA, I believe his new domicile has changed from FL to MA and therefore all his FL income is taxable to MA. (he hasn't lived in FL for a few years - he ownes/owned no home there). Do you agree? | |
Death&Taxes (talk|edits) said: | 8 February 2010 |
| You might read this: Discussion: Military Residence and the Soldiers & Sailors Defense Act | |
| 20 March 2010 | |
| Death&Taxes: That is a good link to a good discussion about the military residency, domicile, etc.
I have a military person who like VBoudwin has been a resident of FL for military purposes. His spouse is disabled without a lot of income and spends a lot of time in another state (about 6 months a year), so they purchased a home there thinking they would qualify for the 1st time homebuyer credit and that may be where they eventually call home. Then they moved back to FL and came to me for tax advice. So right away I started indicating that they needed to take steps to at least make the other state home the main home of the spouse as the military person still indicates the FL address as the main residence even though they own no other real estate except for the new house in another state. This newly purchased home is not a rental and will be used at least as a second home for the couple. They have started taking steps to make the house in the other state her main home and the state of residency of the spouse and since she stayed in the other state about 6 months during 2009, I think we could claim the other state residency for her for 2009. There would not be much income tax for her in that state as she has no earned income, so it seems to make sense to do this and that should help with claiming the first time homebuyer credit for this military person and his spouse. Are there any other comments about having a dual status residency for a military person and his spouse? | |
| 20 March 2010 | |
| Sheldon, I do not believe that's best for your military client. Having a principal home in a state does not automatically make that state the military member's legal residence. In fact, the Soldiers and Sailors Relief Act prohibits the states from asserting this point. Furthermore, the recently passed Military Spouse Residency Relief Act extends that protection to the spouse of the military member as well. By advising them to make another state their legal residence (aka home of record in military jargon), you are unnecessarily exposing their income to state taxation. As far as the FTHBC is concerned, how can they claim if it's a second home to them? And if it's their principal home, it doesn't have to be located in the military member's legal state of residence. | |
| 5 April 2010 | |
| NoVATaxes: I appreciate your input on this matter. In my case, the husband will maintain his home of record and in FL. The wife has very little income to tax in the other state. She is disabled and likes to spend time in the other state near her parents for a significant part of the year. The husband eventually plans to move there with his wife. They have taken steps to make the other state the main home of the wife and that is why I think it is worth trying for the FTHBC. The military have an extended time to claim this credit into 2011. They purchased before the husband was ready to make it his main home, but it is planned that he will also make it his main home when military service is completed. If you read through the link that Death&Taxes provided above, I think it is clear that military can have a principal residence in one state that is not their "home of record" for state residency taxation. So they will be domiciled in the other state while the "home of record" remains FL. It is an interesting case and I have forewarned them that it is not clear that it would be ultimately accepted. I just see no reason not to try for it since the laws are favorable to military in residency matters and extension of the credit. | |
| 5 April 2010 | |
| MA says that once a person is domiciled in MA they are subject to MA tax until they establish domicile in another state (with some exceptions for military spouses who move to be with service member): MA won't even give up people who move overseas! Anyone who spends 183 days in MA and has an "abode" there is also considered a statutory resident, even if they are also residents of another state. This doesn't answer your questions about "principal residence" and the credit, but I thought it might have a bearing on your decisions.
David H | |
