Second home - using it as a primary residence?

Parent Cafe
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<p>We live in (Mass)Taxachussetts. Own a home, mortgage has been paid off. S left for boarding school this fall, making us empty nesters 4 yrs ahead of schedule. I work in tax free NH, H works from home for a company out in California.</p>

<p>H suggested that we buy a small house or condo in NH and “move” there during the week. We would change our mailing address, licenses, car registration and the like. We won’t be selling our MA home. The idea behind this being that we could save on MA state taxes.</p>

<p>Any input? Is this a workable plan? I assume we would still have to pay property taxes in MA since we own that home there, but would that be it for our tax commitments to MA?</p>

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<p>Consult your accountant or attorney, but I think it is unlikely to work.</p>

<p>Here’s why. States decide whether you are a resident primarily based upon your “domicile”. You can have more than one residence, but you only have one domicile at any given time. It is very difficult to change your domicile if you are retaining the home that you lived in. If you sold it and moved completely to another state, moved all your bank accounts, drivers licenses, and safe deposit boxes, etc, and the spend most of your time in the new location, that would qualify. </p>

<p>But if you retain your old home, you’ll likely be deemed to not have changed your domicile. I would talk to someone in the know about taxes, but you can start by going to the Massacussets state site and looking at the domicile rules. If you rented the Mass home to someone, that might help. </p>

<p><a href=“http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/residency-status.html#Domicile[/url]”>http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/residency-status.html#Domicile&lt;/a&gt;&lt;/p&gt;

<p>Be aware that even if your domicile changes, if you maintain a permanent place of abode in MA, and you set foot in the state for more than 183 days in any year (one minute of a day counts as a full day), they will tax you as a resident. You’ll get audited based on where you park your car, and every phone call, charge card record, atm or easypass transaction will be looked at. I have some distant experience at this in another state, and its a pain. Fortunately I had good records and kept track of the days, so they had to go pound sand.</p>

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<p>Why not just move to New Hampshire?</p>

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<p>You can move to NH and only pay your property taxes in MA, same as if you moved to any state from any other state. States that have day rules about domicile say you need to spend 180+ days - meaning days and nights - in that state. I think NH rules are more about intent than days but the standard applied rests on the number of days you spend where.</p>

<p>If your home is not a resort home and you keep it and if you merely buy a small condo to live in during the week, I doubt MA will consider you as switching domicile. It’s kind of obvious if you have a suburban house that it’s really your primary residence. If you want to do that, you would need to make sure all your mail - including local bills - are sent to NH. You should move your bank accounts, etc. there as well. </p>

<p>Funny the hoops people will jump through for some tax savings. I don’t know your tax situation but MA ranks about 33rd in taxation and 30th in income taxation. But to each his own. The cost of maintaining your new primary home in NH would almost certainly exceed any tax savings.</p>

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<p>Big-name athletes have focussed on this issues for years.</p>

<p>I agree with the posters that wonder why you keep the MA house. S1 graduates in 2015 and we joke that the house goes on the market that spring.</p>

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<p>I lived in MA for 13 years and NH for about 23 years. My son works
in Boston and has a residence but he stays with us a few days a
week because of his graduate program. I did tax returns for him
where he had income from MA, ME and NH and have an idea as to how
apportionment goes.</p>

<p>You would generally apportion by how many nights you sleep in a place
and it would probably be a good idea to keep a record of this. There
has been a fair amount of tax and other expense avoidance from MA
residents in NH and MA takes a dim view of this and the DOR has
aggressively gone after people and businesses in the past for these
kinds of things. dadx’ post alludes to some of that.</p>

<p>I have a relative that never registered her car in MA (they had a home
in MA and in the other state but they lived in MA) and she was pulled
over for speeding and she had to pay a fairly hefty fine for
the car registration issue. People do that because insurance costs are so high in MA.</p>

<p>In general, property taxes in NH are high because there are no other
taxes. In MA, property taxes are relatively low. The worst tax
situation is where you live in NH and work in MA.</p>

<p>You would save five to six percent on your income taxes. If you make
$200K together, that would be $10K to $12K. Would it be worth the
trouble to do that for that amount of money (or the actual amount
that it would be)? How much time and money would commuting back and
forth take? Would you want to deal with that in the winter?</p>

<p>I gather that you want to live in MA during the weekends. Is there
a particular reason for that?</p>

<p>If you really want to move to NH (and I could provide a lot of reasons
for why one might want to live here), then I’d suggest selling the
house and moving up here. If you want to visit MA frequently, then
you could rent a small apartment for weekend visits or use hotels
if you only plan to visit infrequently.</p>

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<p>What is going for you is that you have no nexis to MA, other than the house. If you worked in MA, and tried to live in NH to avoid MA tax (reciprocity?) then that is tougher.</p>

<p>I’m guessing though that you must be high enough income to make renting a condo cheaper than paying the tax. Still, you might fly under the radar of the tax man. Just make sure you receive no mail at the MA address. Everything about you should say “lives in NH”.</p>

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<p>^^Yes. You can only have one domicile, so establish that with mail, driver’s licenses, voter registration, tax forms, etc. The other home becomes a weekend home, cottage, whatever but be careful of the amount of time you spend in the non-domicile home. In my opinion, if you only spend weekends there you will probably be OK. I’m assuming you looked at the tax situation carefully, in our state second homes can have higher property taxes than the homestead home…make sure your property taxes in Mass don’t go up if that is the “second home” as it could be a wash.</p>

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<p>I would run the numbers. Based on overall tax burden by state, there isn’t THAT much difference between MA and NH. Yes, overall NH is less, however is it enough less to justify the cost of a new house/condo, etc.? I laugh when I hear Taxachussetts though, coming in 37 overall for overall tax burden…try living in a state like NJ or AK that is near the top :D.</p>

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<p>Upon re-reading, I think that you might have a chance to make this work, since all of your income would be non-Massachussetts income after transferring bank accounts and other investment accounts. </p>

<p>The situation they are looking to capture is for someone who works in MA who simply moves across the border and then files as a non-resident at some lower rate (this happens in New York all the time with CT and NJ residents).</p>

<p>On the other hand, if you use the house every weekend, and you still go the same church and belong to the country club, you might end up in that “counting of your days in the state” mode, especially if you income is high enough to whet their appetite. </p>

<p>BTW, as regards income taxes, I note that there are 20+ states with higher top rates than MA. And that NH taxes interest and dividends (no need to be there for retirement). MA does have a relatively punitive estate tax, but it doesnt apply to most people.</p>

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<p>“BTW, as regards income taxes, I note that there are 20+ states with higher top rates than MA. And that NH taxes interest and dividends (no need to be there for retirement). MA does have a relatively punitive estate tax, but it doesnt apply to most people.”</p>

<p>Our family is looking at NH as our retirement domicile state. For our particular financial mix and family obligations, it makes sense. (Well OK, it’s a no-brainer.) YMMV!</p>

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<p>If you work in MA, then you have to pay MA income taxes on all of your
MA income. You can’t get around that. In this case, though, one works
in NH and the other can work anywhere they want to.</p>

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<p>You can find a lot of apartments just over the border in Nashua NH off
of Route 3. I run through a lot of these apartments (and condos) on a
regular basis (less traffic than running on the main roads). I’d guess
that this is true in Salem, NH too.</p>

<p>I just have trouble seeing it based on the time that you’d use up
commuting back and forth and the (assumed) drop in quality of life
during the week. People that make a lot of money typically value their
time to a high degree and commuting burns up that time. If you life
near the border, you might as well just move over the border.</p>

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<p>I lived in MA for a long time before moving to NH. I was pretty
shocked when we moved up here - it felt like we got a 50% raise. That
was due to housing prices and apartment rentals being so much lower
back then, not having to pay sales taxes, lower prices on things
(food, fuel, restaurants, insurance).</p>

<p>Some things have changed though. A lot of MA residents moved up here
which drove up the price of housing and their desire for more services
drove up local property taxes.</p>

<p>A lot can depend on how you choose to structure your lives. NH has no
income taxes and high property taxes. If you have a lot of income but
choose to live in a modest home, then you can really pay a very low
percentage of your income in taxes to the state. The people that
worked in MA that moved up here did so because they could get far more
house for the money (which, of course changed). I just have a hard
time understanding why they would want to deal with the commute from
NH to Boston or 128.</p>

<p>On Taxachusetts - there are a lot of places where taxes are a lot lower
depending on your circumstances.</p>

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<p>How does this save you in taxes? You still have to pay income taxes to
MA if you work there.</p>

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<p>There’s a $4,800 exemption for the I&D tax and there used to be an
exemption for interest earned in NH institutions.</p>

<p>In the old days before the Fed pushed interest rates to zero, I’d just
get around that tax by parking cash in direct US obligation debt
instruments (savings bonds, treasuries, agencies) or putting cash in
NH banks and credit unions. That’s not practical anymore with yields
as low as they are so I moved into high-dividend stocks so yes, I do
pay taxes there. But there’s no capital gains tax - that does favor
growth over income but I find that the income approach requires less
effort on my part.</p>

<p>MA taxes short-term capital gains at 12% and long-term gains at 5%. I
do short-term trading from time to time and that 12% would be a big
ouch!</p>

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<p>If you like hiking, skiing, shopping, want access to the beach, don’t
like earthquakes, don’t like droughts, don’t like hurricanes, don’t
like tornadoes, like access to excellent healthcare and like a low
crime rate then NH may be for you.</p>

<p>You just have to be able to put up with the very, very cold winters.</p>

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<p>“You just have to be able to put up with the very, very cold winters.”</p>

<p>Unless you spend those winter months elsewhere, which is doable in retirement.</p>

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<p>I have a coworker that does this though he isn’t retired. He wanted to do the dual residence thing (not for tax reasons) and then the housing bust hit and he doesn’t want to sell the place up here because he would have to take a loss on it and it’s unlikely that he will break even anytime soon.</p>

<p>He has a townhouse up here in NH so the outside of his property is maintained while he isn’t here but you can suffer indoor damage from things like ice dams and other water leaks related to the cold weather and living in your unit allows you to spot problems sooner before they become bigger problems.</p>

<p>Maintaining two residences also doesn’t seem the best thing to do if the approach is to minimize expenses.</p>

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<p>Or if the objective is to minimize capital decline. Its not a good time to own stuff you don’t really need that has significant insurance and maintenance carrying costs.</p>

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<p>Each family’s situation is different. What makes sense for one family may be totally inappropriate for another. </p>

<p>Of the choices available for my family’s situation, having NH as our domicile is an obvious choice, even though our preference would be life in San Francisco. YMMV, and probably will.</p>