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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4037
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My wife and I are retired, and have 2 houses, based on where

Customer Question

My wife and I are retired, and have 2 houses, based on where the grandkids live. We split our year between Utah and Arizona. The AZ home has a $40K mortgage balance, the Utah house is paid for. Utah has a flat tax with no deductions and taxes social security. AZ does not tax social security.
MY retirement income is half of my wifes, about 35K for me, $70K for her.
Rather that file joint returns in each state, we want to split our residency. I have a utah license and vote in Utah, she has an AZ license and votes in AZ.
It appears that we can file seperately on the federal, splitting 50/50 our deductions, and then file in our respective states as tho she is full time in AZ and I am full time in Utah. With my income being so low compared to hers, the Utah rates don't affect me much, and as time passes more of my income will become tax free as I have a progressive neurological disease and the Veterans Administration will be increasing my compensation as the condition gets worse, plus at the same time my navy retirement will shift from taxable to non taxable. Eventually, Utah will be taxing only my social security plus a small civilian job pension.
Can we do this? Each of us declare a state as tho we live there all year and forego the half year tax returns for 2 states..?
Submitted: 3 years ago.
Category: Tax
Expert:  Stephen G. replied 3 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

There's no reason to file part-year returns in two states; all of your income is unearned; so you can figure out what state you want to be your primary state of residence; normally it would be the state you spend the most time in; & then you would file joint returns in that state and for Federal purposes;

Stephen E. Grizey :

No matter what you do, there's no reason not to file a joint federal return;

Customer :

There might be some reason based on Utah's rules. They won't let me register a car unless I have a Utah license, they won't allow me a property tax break unless I am a resident. And if I declare AZ our full time rresidency state, my car insurance goes up....

Customer :

granted, none of those are income tax issues

Stephen E. Grizey :

Well, all I can say is the way you proposed to do it isn't right.

Customer :

ok, I can accept that, it was the unearned income that I was confused about....the rules for retirees like us are hard to find on the internet.

Stephen E. Grizey :

Unless you aren't together and are actually bona fide residents of different states, it isn't right & furthermore what you were trying to avoid as far as the part-year residents' returns isn't even as issue unless you were to constantly change your residences back & forth each year

Customer :

well, we are together, it is Utah rules on residency that are so hard to deal with....but since their tax rates are so high we will just do as you say, go with Arizona, where social security isn't taxed. Utah gives very little breaks....

Stephen E. Grizey :

Why doesn't your wife just get a Utah license?

Customer :

we don't change our residences, just live there, is that what you mean?

Stephen E. Grizey :

Say that again;

Stephen E. Grizey :

Have AZ as your primary residence & then just go to Utah whenever you want; is that what you're asking?

Customer :

wife wants to vote in AZ, she did have a Utah license once. we never worked in Utah, just spend half the year there, but half a year doesn't mean we are residents unless we actually register to vote, get new plates on our cars, or what?? what is residencey? can we clain arizona all year and live in utah half the year and not incur a state tax issue...

Customer :

yes that is what I am asking....

Stephen E. Grizey :

Yes

Customer :

or is working there the residency issue? we don't work anymore....

Stephen E. Grizey :

Many people don't live anywhere for 1/2 the year

Customer :

so we just declare a state and let them find us if they can?

Customer :

declare AZ and let Utah consider us vistiors even tho we visit half the year? again, not workers....not earning income

Stephen E. Grizey :

They have a house in New England, a trailer or house in Florida & a house in Arizona or New Mexico. Where are they residents of?

Customer :

whatever they want?

Customer :

meant to say whatever state they want to be considered from....

Stephen E. Grizey :

There's nothing to find. This is America. You can go where you want. The Illinois Supreme Court just ruled that Ron Emanuel is was a resident of Chicago, IL & he spent the last 2 year WORKING in Washington, DC

Customer :

I have Parkinson's and all my doctors are in AZ, and when it gets bad, we will move back to AZ full time.

Customer :

Tell Ron good luck with that....

Customer :

I think I am good with your answer now.....

Stephen E. Grizey :

Well he won on the issue; the point being that there are many factors to consider when you establish a domicile.

Customer :

thanks....

Stephen E. Grizey :

Sounds to me like you are residents of AZ

Stephen E. Grizey :

You should both vote there

Stephen E. Grizey :

Your cars should be registered there

Stephen E. Grizey :

If you spend more time there than UTAH, that would be a plus.............

Customer :

one car never leaves Utah, I will get my daughter's name on the title along with mine, that should take care of that...

Stephen E. Grizey :

What have you done tax wise in the past?

Stephen E. Grizey :

good idea

Customer :

we filed in both states, it was complicated.....but last year my wife figured out that all our income is unearned, and filed that way, but like I said, Utah is flat rate, and taxes social security. Looks like we shouldn't have filed in Utah at all?

Customer :

BTW, I also have memory issues from PD meds, so she does most of the finances...but I finally decided to get some outside advice....she will gloat when I tell her she was right all along...

Stephen E. Grizey :

Right, that wasn't the right thing to do; but what's done is done..................you shouldn't have to file in 2 states under any circumstances based upon your fact pattern.............

Stephen E. Grizey :

Please remember to "Accept", it is the only way we get credit for our work. Feedback, if you have time, and bonuses, where you think they are warranted, are always most appreciated.

Stephen E. Grizey :

I'll be happy to answer any follow-up questions you have.

Customer :

ok, done now....I think....

Stephen E. Grizey :

ok, godd luck

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4037
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 3 other Tax Specialists are ready to help you

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