AZ State Income Tax Question/Referral (sale, apartment, lease)

[Burkmere]

Maybe this should be posted on a different thread, but figure I'd start here. It pertains to my possible AZ State tax liability. Background: I snowbirded from South Dakota from Jan 4 until April 14th. I did not leave the state during that period. My permanent residence is still South Dakota.

I plan on returning from South Dakota to AZ Oct. 1 and to (90% sure) stay permanently. I will at first rent a condo (same one I rented this past Jan.) and probably buy something down the line probably after Jan 1, 2019.

I may also have more taxable income in 2018 than my usual pension, social security, etc. So my tax liability may be considerably higher with this probably resulting income. Thus increasing my concern to find out if I will have AZ state tax liability.

So, I am trying to figure out if in 2018 I'd be liable or AZ state income tax (regardless of wether I have this additional income in 2018 or not). Seems that if it is a strict 6 month living in the state rule, then, yes, possibly (but barely). However, since my initial move in jan was to snowbird, and even if i stay in AZ from Oct 1 through 2018 and beyond, seems to me I would probably not yet be considered an AZ resident for 2018 and liable for the resulting AZ state tax since my initial 3.5 months from Jan 1, 2018 to April 14,d 2018 was to snowbird (plus seems I could say Oct. 1 2018 through Dec 2018 I was snow birding, but decided in 2019 to stay).

Seems if one stays in the state 9 months, then, yes, one would be liable, but less than that....not sure.

Can someone give me advice on this or a referral? You can PM me if you want. Thanks.

[Mouser]

PM Sent

[teddyearp]

Obviously, you need a tax accountant. If you plan on moving to Arizona permanently in October, you may want to go ahead and file an Arizona Part Year return.

[LeoDaVinci]

You become a resident of Arizona on the first day you arrive in the state with the intention of establishing your residence here. Since very few people arrive on January 1, all others should file as part-year residents for the first calendar year. Any tax preparer can help you.

[AZJoeD]

Originally Posted by Burkmere

Maybe this should be posted on a different thread, but figure I'd start here. It pertains to my possible AZ State tax liability. Background: I snowbirded from South Dakota from Jan 4 until April 14th. I did not leave the state during that period. My permanent residence is still South Dakota.

I plan on returning from South Dakota to AZ Oct. 1 and to (90% sure) stay permanently.

You answered your own question in the first paragraph. "My permanent residence is in South Dakota."

So if you had income earned in AZ then you may have to file a non-resident return. But if your income was from SD (even though you were physically in AZ) then you don't have AZ income.

The rules for determining residency are here: https://www.azdor.gov/Portals/0/Procedure/itp92-1.pdf

If you did not intend to be an AZ resident, then you were not.

[Burkmere]

Originally Posted by AZJoeD

You answered your own question in the first paragraph. "My permanent residence is in South Dakota."

So if you had income earned in AZ then you may have to file a non-resident return. But if your income was from SD (even though you were physically in AZ) then you don't have AZ income.

The rules for determining residency are here: https://www.azdor.gov/Portals/0/Procedure/itp92-1.pdf

If you did not intend to be an AZ resident, then you were not.

Ah, of course, that's what I wanted to hear. Now here's a follow up question. I am planning on going back to AZ in Oct. I have a lease to a condo from Oct. 1 through May.

In reality, I will probably buy a condo after I rent in AZ. Currently, I am renting an apartment in South Dakota. Would terminating the lease at the end of Sept. when I "move" to AZ indicate to the State of AZ that I was a resident Oct. 1 and planned on moving there or would the clock start on becoming an AZ resident start with an act such as an actual purchase off a condo there?

I ask also because I may have additional income in 2018 (from sale of land) and South Dakota has no state income tax while
AZ does. So, there could be significant tax implications since I believe AZ considers sale of ordinary income for state tax purposes.

[teddyearp]

Again, a tax professional would be best, however, the sale of land would occur while living in and be income from South Dakota, right? Therefore on your part year return, I do not believe it would count. Unless of course, it did not sell until well after your move to Arizona, i.e. after the year you file a part year resident return.

[Burkmere]

Originally Posted by teddyearp

Again, a tax professional would be best, however, the sale of land would occur while living in and be income from South Dakota, right? Therefore on your part year return, I do not believe it would count. Unless of course, it did not sell until well after your move to Arizona, i.e. after the year you file a part year resident return.

Yeah, I mean, you are right about the tax professional, but if I"m considered a resident of AZ for 2018 based on the time I spent there as explained above, it's considered ordinary income for AZ state tax purposes from what I understand.

South Dakota has no state income tax.

Of course long term capital gain tax would apply regardless. But if I'm considered an AZ resident they would ta the gain as ordinary income resulting in a chunk of state tax liability in AZ.

[teddyearp]

Originally Posted by Burkmere

Yeah, I mean, you are right about the tax professional, but if I"m considered a resident of AZ for 2018 based on the time I spent there as explained above, it's considered ordinary income for AZ state tax purposes from what I understand.

South Dakota has no state income tax.

Of course long term capital gain tax would apply regardless. But if I'm considered an AZ resident they would ta the gain as ordinary income resulting in a chunk of state tax liability in AZ.

Well, it sort of depends on when you decide to be a resident. If you do in fact file a part year return for 2018, only income earned during the portion of the year you were an Arizona resident would be taxed by Arizona.

[Burkmere]

Originally Posted by teddyearp

Well, it sort of depends on when you decide to be a resident. If you do in fact file a part year return for 2018, only income earned during the portion of the year you were an Arizona resident would be taxed by Arizona.

Thanks for the info.