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Old 04-05-2009, 05:57 AM
 
35 posts, read 236,707 times
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Default Buying a home in one state while living in another

I am a first time homebuyer so sorry if these questions seem basic. We haven't talkted to a bank about this yet.

My husband and I live in CT and are hoping to relocate to FL sometime next year. We were also hoping we could take advantage of the $8000 tax credit for 1st time homebuyers. Would it be possible for us to purchase our Florida house this year while continuing to live in CT until next year? We are currently living with relatives so are paying no rent. We would be looking to buy a house around $165,000. In Ct we have a combined income of $75,000. We would have about $40,000 to put down, have no credit card debt and owe about $4000 on one car. We both have credit scores 750 and above. Would we be able to get a mortgage this way? Would this be considered a vacation/second home because we won't be living there full time? Would this disqualify us from the tax credit?
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Old 04-05-2009, 08:14 AM
 
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Originally Posted by ACS228 View Post
I am a first time homebuyer so sorry if these questions seem basic. We haven't talkted to a bank about this yet.

My husband and I live in CT and are hoping to relocate to FL sometime next year. We were also hoping we could take advantage of the $8000 tax credit for 1st time homebuyers. Would it be possible for us to purchase our Florida house this year while continuing to live in CT until next year? We are currently living with relatives so are paying no rent. We would be looking to buy a house around $165,000. In Ct we have a combined income of $75,000. We would have about $40,000 to put down, have no credit card debt and owe about $4000 on one car. We both have credit scores 750 and above. Would we be able to get a mortgage this way? Would this be considered a vacation/second home because we won't be living there full time? Would this disqualify us from the tax credit?
It has to be your primary residence in order to qualify for a 8K tax credit.

It would be considered a "second home" if you are still living in CT.

Do you have a job down in FL? You technically do not have to live full time in FL in order to be considered a resident (this applies to most state's residency requirements).

My best advice would be to get the new home. Get a Florida Driver's license and get your cars insured and registered in Florida. This way you can prove that you have Florida roots.

There are strict residency requirement for claiming Florida as your primary home and residence.

To become a resident of Florida you: File Declaration of Domicile or Register to Vote, Register auto in Florida, get
Florida's driver's license, File for Homestead Exemption if you own property.

"To be considered a Florida resident, you have to reside in Florida for six or more months each year. The six months need not be consecutive. There are other actions you can take that will reinforce your claim to be a Florida resident: for example, changing your drivers license, registering to vote, and officially changing your mailing address. You may also do a formal declaration of domicile in the Florida county in which you reside part time. If you cannot adequately prove that you are indeed a Florida resident, the other state you live in may choose to tax you as if you still lived there."

I think this cut and past came from myflorida.com

This is a very gray area you are working on so you want to cover everything the IRS can nail you on.

The IRS tries to cut down on people who claim to live in no-state income states like Florida while maintaining a residency in another state.

Case in point. One of my co-workers in suburban Maryland had a home in Maryland (Chevy Chase) and another home in Naples, FL. He's an independent contractor so is free to claim whatever state he considers "his home" It really doesn't matter that he traveled and worked in Maryland for 8 months out of the year. He still traveled home on weekends to see his family on his time off. So he still "technically resides in Florida" and is on a working assignement most of the time.

That's for a 1099. W-2 employees must live in the state for at least 6 months.
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Old 04-05-2009, 02:21 PM
 
Location: Baltimore
1,749 posts, read 4,339,917 times
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Quote:
Originally Posted by aneftp View Post
It has to be your primary residence in order to qualify for a 8K tax credit.

It would be considered a "second home" if you are still living in CT.

Do you have a job down in FL? You technically do not have to live full time in FL in order to be considered a resident (this applies to most state's residency requirements).

My best advice would be to get the new home. Get a Florida Driver's license and get your cars insured and registered in Florida. This way you can prove that you have Florida roots.

There are strict residency requirement for claiming Florida as your primary home and residence.

To become a resident of Florida you: File Declaration of Domicile or Register to Vote, Register auto in Florida, get
Florida's driver's license, File for Homestead Exemption if you own property.

"To be considered a Florida resident, you have to reside in Florida for six or more months each year. The six months need not be consecutive. There are other actions you can take that will reinforce your claim to be a Florida resident: for example, changing your drivers license, registering to vote, and officially changing your mailing address. You may also do a formal declaration of domicile in the Florida county in which you reside part time. If you cannot adequately prove that you are indeed a Florida resident, the other state you live in may choose to tax you as if you still lived there."

I think this cut and past came from myflorida.com

This is a very gray area you are working on so you want to cover everything the IRS can nail you on.

The IRS tries to cut down on people who claim to live in no-state income states like Florida while maintaining a residency in another state.

Case in point. One of my co-workers in suburban Maryland had a home in Maryland (Chevy Chase) and another home in Naples, FL. He's an independent contractor so is free to claim whatever state he considers "his home" It really doesn't matter that he traveled and worked in Maryland for 8 months out of the year. He still traveled home on weekends to see his family on his time off. So he still "technically resides in Florida" and is on a working assignement most of the time.

That's for a 1099. W-2 employees must live in the state for at least 6 months.
The IRS doesn't care; it's the state that cares. And your "friend" isn't "free to claim whatever state he considers his home". There are strict rules on domicile. Maryland is one state that looks very closely at individuals who claim a no income tax state as their domicile. Besides, even if he really is domiciled in Florida, he would be subject to tax on his income as a non-resident if it is earned in Maryland. States will give credit for tax paid to another state, but since Florida has no income tax, he would be taxed on all of his income in Maryland as a non-resident.
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Old 04-05-2009, 05:18 PM
 
35 posts, read 236,707 times
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Thanks Aneftp
We don't have jobs yet. We want to relocate and were hoping to take advantage of the down market and the tax credit by buying this year. We're not trying to get over paying taxes or anything. My husband needs to stay at his job at least until next year. Also, if we continue to live in CT we could save about $1000 per month while still paying for the Florida house. (a nice emergency fund for when we finally did move)
Too bad about loosing out on the tax credit, maybe they will extend it to next year?
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Old 04-06-2009, 05:24 AM
 
3,402 posts, read 3,558,525 times
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Originally Posted by janetvj View Post
The IRS doesn't care; it's the state that cares. And your "friend" isn't "free to claim whatever state he considers his home". There are strict rules on domicile. Maryland is one state that looks very closely at individuals who claim a no income tax state as their domicile. Besides, even if he really is domiciled in Florida, he would be subject to tax on his income as a non-resident if it is earned in Maryland. States will give credit for tax paid to another state, but since Florida has no income tax, he would be taxed on all of his income in Maryland as a non-resident.
It's a lot more complicated than that. He second home is based in Maryland but 90% of the income is actually derived from his contracting work in Washington DC. So Maryland cannot tax income earned in Washington DC. Gotta love Washington DC (taxation without representation). The District is very special because it does not levy a tax on non-DC residents on 1099. So he gets to choose between Florida and Maryland taxes. There are so many people who do contracting work based in Washington DC that are out of state that the DC cannot enact any tax laws (like they do for NYC...which I know levies extra taxes on non-residents)

Since he actually flys home to Florida at least 15-20 times a year (mainly on weekends), he can be considered a Florida resident and there's nothing the state of Maryland can do about that. He's already been audited by the state of Maryland and they could not prove that his primary home is in Maryland.

That's why I tell people to get a Real Florida license (not "Florida only driver's license), register to vote in Florida, get your automobile insurance in Florida.

Some people who go "halfway" and still keep their out of state residence and car tags can be nailed by Maryland. That state will try to suck every nickel out of hard earning people who have higher income while trying to support the crack addicts in Baltimore.
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Old 04-06-2009, 06:26 AM
 
Location: Baltimore
1,749 posts, read 4,339,917 times
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Quote:
Originally Posted by aneftp View Post
...Some people who go "halfway" and still keep their out of state residence and car tags can be nailed by Maryland. That state will try to suck every nickel out of hard earning people who have higher income while trying to support the crack addicts in Baltimore.
Actually I look at it a little differently. Your friend owns property in MD and is physically present in MD; therefore he uses the resources of the state, expects to be protected by fire and police departments, wants adequate emergency medical services, wants to drive on good roads and have usable state parks and recreation, etc., yet does not want to pay taxes to support these things. He wants the benefits but wants other taxpayers to foot the bill.
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Old 04-06-2009, 11:07 AM
 
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Originally Posted by janetvj View Post
Actually I look at it a little differently. Your friend owns property in MD and is physically present in MD; therefore he uses the resources of the state, expects to be protected by fire and police departments, wants adequate emergency medical services, wants to drive on good roads and have usable state parks and recreation, etc., yet does not want to pay taxes to support these things. He wants the benefits but wants other taxpayers to foot the bill.
No, he pays the full 12K a year in Real Estate taxes (did not even claim a homestead exemption in MD and has his home in MD listed as a second home). Does not send his kids to public school in MD. Sends his kids to private school down in Florida (another 9K in RE taxes but at least he gets the Homestead down there). So he's paying twice as much in property taxes and not using any public schools. If that's your rationale, than all the people who qualify for Earn Income Tax Credit (zero fed tax liability) need to actually contribute to the system. All those on medicaid need to contribute to the system.

He's a contractor (1099). He has roots down in Florida. He actually lives there most of the time on weekends. What do you want him to do? Tell Florida that he's a Maryland resident? Florida tells him he needs to get his car tags and drivers license or they are going to fine him money. They won't allow his wife and kids to claim the Florida home as a homestead because all parties on the house title must have Florida drivers license with the correct FL address on it. You can only claim one state and bottom line is "what do you consider your home." If your wife and kids are down in FL and you make every effort to be there (outside of work), than FL is your primary residence.

Using your rationale (about using taxpayer roads, parks, public schools, why do all the congressmen and senators claim their home states when they maintain a residence in Maryland, Virginia or DC?

Now, if you really want to go after the true tax cheats, they should go after all these people with Alaskan car tags I see driving around the DC area. Some of them "claim to be Alaska" residents but fly back there twice a year.

Look, that's just the laws of being a 1099. You end up being killed on the first 106K of your taxes because you pay both ends of the self employment taxes (15.6%) and you end up paying 2.9% of medicare taxes (no income limit) (instead of 1.45% of normal W2 employees). You are responsible for your own medical insurance. You do not qualify for unemployment benefits if your business goes down under.

You can't punish people for being successful. People will lose their incentive to work hard and create their own businesses.
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Old 04-06-2009, 11:40 AM
 
Location: Baltimore
1,749 posts, read 4,339,917 times
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Quote:
Originally Posted by aneftp View Post
No, he pays the full 12K a year in Real Estate taxes (did not even claim a homestead exemption in MD and has his home in MD listed as a second home). Does not send his kids to public school in MD. Sends his kids to private school down in Florida (another 9K in RE taxes but at least he gets the Homestead down there). So he's paying twice as much in property taxes and not using any public schools. If that's your rationale, than all the people who qualify for Earn Income Tax Credit (zero fed tax liability) need to actually contribute to the system. All those on medicaid need to contribute to the system.

He's a contractor (1099). He has roots down in Florida. He actually lives there most of the time on weekends. What do you want him to do? Tell Florida that he's a Maryland resident? Florida tells him he needs to get his car tags and drivers license or they are going to fine him money. They won't allow his wife and kids to claim the Florida home as a homestead because all parties on the house title must have Florida drivers license with the correct FL address on it. You can only claim one state and bottom line is "what do you consider your home." If your wife and kids are down in FL and you make every effort to be there (outside of work), than FL is your primary residence.

Using your rationale (about using taxpayer roads, parks, public schools, why do all the congressmen and senators claim their home states when they maintain a residence in Maryland, Virginia or DC?

Now, if you really want to go after the true tax cheats, they should go after all these people with Alaskan car tags I see driving around the DC area. Some of them "claim to be Alaska" residents but fly back there twice a year.

Look, that's just the laws of being a 1099. You end up being killed on the first 106K of your taxes because you pay both ends of the self employment taxes (15.6%) and you end up paying 2.9% of medicare taxes (no income limit) (instead of 1.45% of normal W2 employees). You are responsible for your own medical insurance. You do not qualify for unemployment benefits if your business goes down under.

You can't punish people for being successful. People will lose their incentive to work hard and create their own businesses.
If he is physically present in MD 183 days or more a year, he is a statutory resident, since he has maintained a place of abode for more than 6 months of the year. The 183 days do not have to be consecutive. A statutory resident is required to file a MD resident return and pay state and local tax accordingly.

And I agree - there are a lot of tax scoflaws out there. But there are a lot of taxpayers who do play by the rules. That's all I ask; that everyone play by the rules. If the laws are on the books, then abide by the laws. If the laws are unfair, then work to overturn them, so the playing field remains level.
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Old 04-06-2009, 12:19 PM
 
3,402 posts, read 3,558,525 times
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Originally Posted by janetvj View Post
If he is physically present in MD 183 days or more a year, he is a statutory resident, since he has maintained a place of abode for more than 6 months of the year. The 183 days do not have to be consecutive. A statutory resident is required to file a MD resident return and pay state and local tax accordingly.

And I agree - there are a lot of tax scoflaws out there. But there are a lot of taxpayers who do play by the rules. That's all I ask; that everyone play by the rules. If the laws are on the books, then abide by the laws. If the laws are unfair, then work to overturn them, so the playing field remains level.
I'm the exact opposite of my friend. I also have a home in Maryland and another home in Florida. I never earned any income in MD because I was traveling on business (also an independent contractor).

I actually paid MD state income taxes for half the year last year (tax year 2008) even though I never earned any income there. I still considered it my primary home until May 24 2008.

I considered myself a Florida residence once I switched my drivers license over to Florida after Memorial Day 2008 and rented an apartment. My accountant thinks I'm crazy to want to pay MD taxes, even partial year because all my 1099 MISC income came with my Florida address. Knowing my luck, I'll get audited by the state wanting more money.
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Old 04-06-2009, 06:50 PM
 
23,510 posts, read 30,966,214 times
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Originally Posted by aneftp View Post
That's for a 1099. W-2 employees must live in the state for at least 6 months.
Not quite.

My husband and I own one home, it's in Florida. I live here full time. He also rents a place in another state, as technically that is where his office is. He works there about 2/3 of the year, and telecommutes from here the remaining 1/3 of the time. He claims FL as his home, is registered to vote here, has his car registered here, and DL here. He has to keep track of what days he works in which state. He pays income tax on the days he works in the other state, but not the days he works in FL. He is a full employee--W-2.
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