No, I am afraid not. The state you live 51% time will be your state of residence and you will be subject to the state’s taxes, I would think. You don’t get to straddle. Is the income tax prorated; you pay 51% to your primary state, 49% to the second state?
If your state of residence is New Hampshire 51% of the time…or FL 51% of the time…you won’t have state income tax to pay there…there is NO state income tax in those states. Lots of retirees do this.
@IxnayBob right?
Now if your wife is still working in Massachusetts, I believe she would file her state taxes there as a non-resident IF she lived 51% of the time in another state.
@thumper1 That would be wage tax not state income tax, I would think. If lxnayBob lived in NH 51% of the time and in MA 49% of the time, would they need to pay MA income tax on 49% of their annual income?
^^it depends on where that income is sourced. If the income is all wage income from MA, saying that you live in FLA half of the year ain’t gonna cut it with the MA tax folks.
For example, you live in MA for 3 months and work/consult full time while there. Then 100% of that income is taxed in MA.
Bob and his wife could live full time in Antartica, but if his wife has MA-sourced income, it will be taxed by MA.
I wa thinking about investment income. How do you decide where the investment income is sourced?
That was our experience when DW worked (legitimately) in both NYC and NJ, and additionally her employer attributed some of her income to IL and CA. The tax situation always seemed to be the maximum of the amounts involved, regardless of where it was attributed. This year, I guess we’ll add MA to the mix 
Who owns the investment income? If you establish residency in a state without INCOME tax, you would not pay STATE income tax on that income.
Your wife, however, if she continues to work in MA would pay state income tax there as a non-resident (assuming she can establish residency in a state without state income tax like NH or FL).
@IxnayBob right?
@BunsenBurner, interesting. Probably if I were analyzing this carefully, I should put greater weight on state income tax because paying that for 10 years might match the state estate tax hit.
@thumper1 and @Iglooo and @bluebayou, I’ve helped start a few businesses, none of them employ me. The primary one is a MA LLC. My non-controlling share is owned by a dynasty trust (that is not domiciled in MA). The LLC receives revenue from from companies around the world. Almost none of that income is from Massachusetts. The LLC has an office for 2-3 administrative folks but the other employees are scattered around the country. If I were not living in Massachusetts, there would be no necessary reason to keep it in Massachusetts except for one very good, very loyal employee – but I’m sure she could work from home if we wanted. I’ve co-founded a new company in Silicon Valley. I’m not an employee of either firm.
My employer is a MA C-Corp that receives income from the LLC and other entities, but the C-Corp could be moved anyplace as I am the only employee. It could move its place of business (and state of registration, I’d guess) pretty easily. So, by moving the business location and tax domicile of the C-Corp and maybe of the LLC, it would be easy to have no MA sourced income if I were not living in MA. Anyway, @bluebayou, if I have it right, the wage income I receive from the C-Corp would be FL or WY income (or from wherever I moved the C-Corp) and not MA income. Correct?
As long as I am not in the state for less than half the year, if the companies moved their office, I would think the MA tax authorities ought to think I was not a MA resident.
The harder problem for me would be my wife. We have a great studio next to our house and when we move (we no longer need a 5 BR house so we do plan to sell), we will need to replace it. But, more important, she has a community of friends and of artists who can come over and look at her work. She used to have lots of shows in Boston and New England, but over the last five plus years, she has been showing in NY and now in London (two London shows coming up including a one-person show) and no longer has a gallery in Boston representing her (the galleries representing mid-market artists have gone downhill in Boston and she is pushing toward the upper end of the market in NY/London. That community is harder to replace. The source of her income is from the galleries (which are no longer in MA) plus art consultants / private sales of older work (which are often in MA). I think the MA tax folks might cue on her. I wonder if she would have to be out of state at least half the year as well. I travel enough that it is easy for me to be out of any state for half the time (next month: Vienna, DC, NY, Mexico City, London and maybe Zurich).
I did figure out that the amount I pay in MA state tax in a typical year could finance the mortgage of a nice condo or house in FL. [Wasn’t thinking about insurance, HOA, etc.]
You have to be a resident of a state, don’t you? And pay the income tax to the state you are domiciled? Is there a way getting out of that?
Once more @Iglooo
Some states do NOT have a state income tax. They just don’t. So if you are a resident of one of those states…you would NOT have a state income tax to pay…because there is NO state income tax in those states. FL, NH, Alaska, Texas, for example.
@thumper1 I don’t have a choice to be in tax free state. My choices are between high tax and low tax states.
“Who owns the investment income? If you establish residency in a state without INCOME tax, you would not pay STATE income tax on that income.”
Some states might not have a tax on earned income but they could have a tax on dividend and interest income.
@shawbridge
“I did figure out that the amount I pay in MA state tax in a typical year could finance the mortgage of a nice condo or house in FL.”
well, that ALONE is a good enough reason to ditch MA for FLA as your primary state of residence, imho.
Add to that the decreasing importance of your wife’s art network in Ma to her ability to earn $$, and I’d say- what are you waiting for???
And yes, she would also have to be out of MA over 1/2 the year as well.
Where you pay your state income tax is complicated. Generally (AFAIK, not a tax pro)
- you will pay state income tax on all income, to the state you a resident of.
- you will also pay income tax to the state you were in when you earned the income, or where the office you get paid from is.
So, for example, if you live in NH but work in MA, you will pay income tax to MA
- in order to prevent double taxation, your state of residence will generally give a credit for taxes paid to another state.
- many states are also starting to tax you if are merely visiting the state on business (the so-called "jock" tax). Some states have a threshold before tax kicks in, some (like NY for example, and probably CA) tax from the first day. Some states consider connecting to a machine in the state while telecommuting to be the same as physically visiting the state.
- some states have reciprocity agreements with surrounding states that limit or get rid of withholding taxes from nonresident income
- states have different rules about who they consider a resident, and it is possible to get in a situation where two states will both consider you a resident for tax purposes, until you painfully resolve it.
- some states tax you on worldwide income, if they think you are a resident. For example, if you are a MA resident and move overseas, you will owe MA state income tax even if you never set for in the state for the entire year.
There’s probably other complications I didn’t mention.
When DD/SIL/Family move somewhere somewhat permanent, and after we retire (less than 3 years) we need to decide what we want to do. It will take us some time to do the ‘projects’ around the home to get it ready to sell quickly competing against new homes - so look to add features for eye appeal. Some people, energetically get that done while working and all kind of other things. No me at this stage of my life.
We can always live in a close by bordering state to DD/SIL/Family that is more tax friendly. Certainly evaluating ‘top tax destinations for retirees’).
Thinking and planning for the good times later. Having good times now, but will be even better once we can stop the work ‘grind’. We like what we do, but will like retirement! Especially because we have money and can afford to be retired and live comfortably.
@notrichenough, that is daunting. Lots of legal/accounting time needed to make sure one does it right. Thanks. The jock tax is a little scary. The accounting time to do that would be painful. Fortunately a lot of my consulting income is generated out of the country so we don’t usually have to deal with that (a few countries like Canada and Brazil withhold and I need to file for Federal tax credits while others don’t).
@SOSConcern, I am excited about the next phase of life. I said this to ShawWife and she said I had gotten her excited too. She’s trying to figure out what she likes about where we currently live. The burden of house fixup will largely fall on ShawWife as I’m really no good at that. We are waiting to see where ShawD settles, although who knows when kids settle.
We won’t stop working as it is too much fun generally (though I could cut down some of my traveling and maybe will spend more time on my startup and on my pro bono activities). We were driving in to Chinatown for our Jewish Christmas last night and ShawWife asked if I would keep doing what I was doing if I wasn’t leaving a legacy (e.g., world was going to end or no one would notice what I do). Her answer was yes. Mine was probably more targeted and I’d spend more on hiking in the mountains and maybe more on pro bono. If the world was going to end, I’d worry a lot less about accumulating wealth to leave for the next generation.
I think I read somewhere that NY also taxes all the new millionaires who show up at the Stock Exchange to ring the bell for their new IPO. (They earn the income once their company goes live on the Stock Exchange, and if they are visiting NYC for the event, they earn a bunch of income that day.)
Quiet bunch… hope you all had a great holiday. HAPPY NEW YEAR.
DH is on furlough. He has spent the past week and a half reading, eating and watching TV, only leaving the house to buy groceries. OMG, he needs to get some other hobbies before he retires or I will go nuts!!
I feel your pain, @CountingDown. Hugs. FIL’s life revolved around his work… his retirement was not a happy one. Mr. is just as invested in his work, but at least he has hobbies. Or so I think.