If I Spend Six Months and a Day in Another State, Can I Save Minnesota State Income Tax?

Over the past year, Minnesotans have understandably started thinking about spending winters in a warmer location, such as Florida, Nevada, Texas or Arizona, especially because working remotely has become the new normal. Minnesotans are wondering: could or should they change their residency to achieve income tax savings?

One of the most common misconceptions that I hear is that if someone spends six months and a day in another state, he or she automatically becomes a resident of that state and will not have to pay tax to Minnesota. That assumption is absolutely false.

Minnesota will continue to treat you as a Minnesota resident if you fail either one of the following tests:

  1. Physical presence—if you cannot prove that you spent more than half the year out of the state and you continued to maintain an “abode” in Minnesota, you will automatically be considered a Minnesota resident. This is not a “safe harbor.” If you cannot establish that you were out of the state for more than half the year, you will automatically lose your Minnesota residency audit. On the other hand, if you can establish absence from Minnesota for more than half the year, then you can move on to the second test—the domicile test.
  2. Domicile—if you can prove that you spent less than half the year in Minnesota, then you must also prove that you established “domicile” in a new state. Minnesota law provides that you cannot have more than one domicile. The domicile test is complex and has many presumptions and factors. Where someone spends his or her time is just one of those factors, though it is often a very important one. Whether a person can successfully establish domicile in another state and no longer be domiciled in Minnesota is a very fact-specific inquiry that depends on a combination of all the factors.

The key takeaway is that under Minnesota law, there is no “safe harbor.” There is absolutely no provision that says if you stay out of Minnesota for more than half the year, that you would no longer be a Minnesota resident. Nor is there a provision that says if you spend more than half the year in another state, that you automatically become a resident of that state and not Minnesota. In other words, passing the “six-months-and-a-day” test only means that you do not automatically lose your residency audit.

If you are thinking about changing your residency from Minnesota to another state, please reach out for a consultation on how to do so as effectively as possible. Our process includes a 1-2 hour consultation followed by a personalized memorandum and checklist that can serve as a guide.

  • Masha M. Yevzelman

    Her experience includes resolving and litigating numerous types of tax disputes:

    • State Corporate Income and Franchise Taxes: including nexus and Public Law 86-272, combination, business versus non-business income ...
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