And The Winner
of the iPad Drawing is...
+ Residency Issues for Retirees & Home
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tax season behind us we want to say THANK YOU to everyone for
making the start of 2013 successful for us!
We greatly appreciate you choosing our firm and especially the
new clients many of you referred to us!
If you recall depending upon
when you brought in your tax return information, we put in one
or more tickets for a drawing of an Apple iPad with Retina
With over 240 tickets in a big
box we drew and our winner is Darryl & Deidra Owens of
Congratulations to Darryl & his family and again thank you for being our
Residency Issues for Retirees &
10,000 baby boomers turning 65 each day, some may decide
to move to another state for a variety of reasons. These
include living in a warmer climate, being closer to children
or other relatives, avoiding state income tax, health reasons,
or a combination thereof.
But, states and municipalities
are looking for every available dollar to shore up shrinking
budgets. So retirees should use caution to avoid being
overtaxed due to a move.
If the retiree's move is intended to be permanent, it is
important that legal domicile be established in the new state.
If domicile is not established, the retiree may be subject
to income tax as a resident of both the
old and new states.
In addition, since each state
has its own rules relating to residence and domicile, both
states may try to impose taxes on the retiree even if he or
she has established domicile in the new state, but has not
adequately relinquished domicile in the previous state.
Furthermore, if the retiree dies without establishing
domicile, both the old and the new states may claim
jurisdiction over the retiree's estate.
The more time that elapses after the move and the more steps
the retiree takes to establish domicile in the new state, the
more difficult it will be for the old state to assert that the
retiree resides or has domicile there.
The following steps tend to establish domicile in a new
Register to vote in the new location.
- File a change of address form with the post office at
the old location and change the address on documents, such as
tax returns, wills, contracts, insurance policies, passports,
and living trust agreements.
- Obtain a driver's license and register automobiles in
the new location.
- Open and use bank accounts in the new location.
- Move items from safe deposit boxes in the old
location to the new location.
- Purchase or lease a residence in the new state and
sell the residence in the old state.
- If an income tax return is required, file a resident
return in the new state and a nonresident return (or no
return, if appropriate) in the old state.
- File for property tax relief
under a homestead exemption (if any) in the new state.
For many purposes, the location
of property is determined by reference to state law, and
legally may be deemed to be somewhere other than where the
property is physically located. The state in which the
property is deemed to be located may assess income taxes (if
any) on income or gains relating to the property.
The state may also assess death
and succession taxes, and that state will be where probate
proceedings will occur when the individual dies. Furthermore,
rules of that state will be used to determine whether
testamentary instruments are valid and whether the terms of
the instruments (such as the powers of a trustee) are legally
The retiree's state of domicile generally determines the rules
relating to the ownership and tax treatment of intangible
personal property. Thus, if the retiree established domicile
in a new state, that state's laws generally will apply to his
or her intangible assets, such as bank accounts, stocks,
bonds, notes, partnership interests, trust income rights, and
Interest income from a savings
account, for example, will normally be taxed by the state of
domicile, rather than the state in which the account is
Simplified Home Office Deduction
IRS recently announced a simplified option that many owners of
home-based businesses and some home-based workers may use to
figure their deductions for the business use of their homes.
The new optional deduction,
capped at $1,500 per year based on $5 a square foot for up to
300 square feet, will reduce the paperwork and recordkeeping
burden on small businesses. The new option is available
beginning in 2013.
Though homeowners using the new option cannot depreciate the
portion of their home used in a trade or business,
they can claim allowable mortgage
interest, real estate taxes, and casualty losses on the home
as itemized deductions on Schedule A, if they choose to
itemize their deductions. These deductions need not
be allocated between personal and business use, as is required
under the regular method.
Business expenses unrelated to the home, such as advertising,
supplies, and wages paid to employees, can still be fully
deductible. Current restrictions on the home office deduction,
such as the requirement that a home office must be used
regularly and exclusively for business and the limit tied to
the income derived from the particular business, still apply
under the new option.
In tax year 2010, the most recent year for which figures are
available, the IRS indicates nearly 3.4 million taxpayers
claimed deductions for business use of a home. Please contact
us if you would like more information on the home office
deduction or any other tax compliance or planning issue.
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W. Edward Newton Jr.,
Certified Public Accountant