Trump is known for his bold moves and has done it again. He has left his Trump Tower in Manhattan to reside at Mar-a-Lago which was originally home to the cereal heiress Marjorie Merriweather Post.
President Trump and his wife Melania filled a declaration of domicile in September in Palm Beach County saying his resort in Palm Beach will be their permanent residence.
I think most people would agree this is a move to avoid taxes. He has also put conservation easements on his golf courses, and received large breaks, he's put historic preservation easements on Mar-a-Lago along with his Trump International Hotel in Washington, D.C.
Since he has not released his tax returns, his claim to smart dealings with taxes is still unknown. Keep in mind, taxpayers are only taxed on federal adjusted gross income. If there is no adjusted gross income due to losses or depreciation, they would not have New York taxable income.
Trump's move to Florida from New York might just be his biggest tax break to date. Both he and Melania would escape New York State and New York City's income taxes of a whopping 12.7%. If they both die in Florida, they will also escape New York estate tax, a whopping 16% levy on assets over $5.75 million.
Chris Zander, president of Evercore Wealth Management in NYC, said high-stake moves are hot topics. They continually have conversations with clients about changing their domiciles from high tax areas to Florida. The firm opened an office in Tampa, FL in 2013 and another in Palm Beach in 2018.
He went on to say it's not easy to just leave your old state's tax collector behind. The Trumps will have to make sure they do not spend more than 183 days in New York State and even any part of a day or airport layover.
If New York tax authorities were to audit the Trumps, the audit would have to focus on the “domicile test”. Meaning, where the Trumps consider home, secondly the auditors would have to look to their alternative residency test, the “statutory residency” and whether they spent more than 183 days in a New York residence.
Third, even if they were able to establish a non-residency, the auditors would have look at whether they properly allocated their sourced income to New York on their tax returns.
In the eyes of the New York State tax department, can Trump establish that he changed his domicile from New York now? Tim Noonan is a tax lawyer with Hodgson Russ in Buffalo, NY who specializes in residency tax audits.
This usually requires a taxpayer to prove clearly and convincingly showing evidence they have not only left New York but landed in another state, in this case, Florida. The question arises, can the President establish his residency now in the fall of 2019 showing he has sufficiently landed in Florida.
The domicile test is largely based on a taxpayer's intent and actions so his filling of the Florida domicile declaration is important but not dispositive, bringing about a settlement of the disposition of property.
If you are planning on moving, you should look into a comprehensive tax guide to know what to expect in a state residency tax audit.