Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I live in Connecticut and I’m looking to buy a pied-à-terre in Manhattan. What are the tax implications for a part-time resident?
If you plan to have a home in New York City, consider whether you’ll be working in New York or if you plan to travel to New York 183 days or more in a calendar year.
If so, buying a pied-à-terre (or even renting or leasing an apartment) in Manhattan can have “disastrous” income tax implications, said Bridget La Rosa, partner at Fox Rothschild law firm in New York City, even if it doesn’t impact the property taxes you need to pay for the homes you own. Paying income taxes twice could be one of them.
As a Connecticut resident who works in the Empire State, you likely have New York employment earnings to report and you’d file the following income tax returns: non-resident New York, federal and Connecticut resident, Ms. La Rosa said. You’d get credit on your Connecticut return for the taxes that you paid on your New York income to New York state, but not for other income such as dividends and interest. Therefore, “you may end up paying tax twice on this type of income if New York considers you a statutory resident.”
If you have a home in New York state at least 11 months of the year and spend more than 183 days per calendar year in New York, then for tax purposes, you are considered a New York state resident. And, if your home is in any of the five boroughs of New York City— a 4% city income tax kicks in, said Gideon Rothschild, partner at Moses & Singer law office, also in New York City. Plus, he said, you’d have to pay New York state taxes on your entire income.
It’s easier than you might think to be in New York 183 days or more. Just working five days a week in your New York office already means you spend more than 200 days in the state, Ms. La Rosa noted. Any time you are physically in New York counts as a day, she said.
“Even if you do not spend the night in your Manhattan apartment, the fact that you are maintaining one and it is available for your use, and you spent even an hour of a day in New York will count as a New York day,” Ms. La Rosa said.
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