Living in assisted living while maintaining private residence in another state

[ketrocel]

My relative moved into assisted living this past year.  The assisted living facility is located in a different state than their primary residence, which they still own, maintain, and pay related utilities and taxes for.  My relative no longer works and only uses social security and retirement accounts for income.  Disbursements from those accounts withheld money for federal and the state the primary residence is in, but not the state the assisted living facility is in.

My two questions are:

1. What should be reported on tax forms as far as residency?  The state of primary residence, the state of the assisted living facility, or both?

2. Do taxes need to be withheld for the state the assisted living facility is in?

[DanielV01 · Accepted solution]

The answers to both questions are it depends on the two states laws.  Here's some general guidance:

Question 1:  Your relative is either a part-year resident of each state or a full-year (statutory) resident of the first state and a part-year resident (or maybe even a nonresident) of state 2.  Most states have a "statutory resident" requirement if you own/maintain a residence (a home, apartment, or other type of "abode" that is in your possession, but not including "temporary" residences like long-term hotel rooms, army barracks, college dorms, etc.) and are physically present in the state for at least 183/184 days in the year.  Your relative clearly meets the first test (owning the residence, even though no longer staying there), so do they also meet the second?  If the answer is yes, then they are a resident for the entire year in that state.

For state 2, they are a part-year resident if the transfer to the nursing facility is considered a permanent change of address.  Although not an abode, it certainly may (and likely does) constitute permanent residence.  Again, that state's residency laws will guide you.

Question 2:  It depends again.  Obviously, 2021 is over, so the situation will be what it will be.  However, going forward, if your relative is considered a resident of state 2, then whether or not you need to have taxes withheld from their income sources (retirement and social security is what you mentioned), will depend on whether the state taxes those sources of income.  Many do not, or give a partial exemption to the income (in addition to their own deductions and exemptions).

However, if your relative is not considered a resident (because their nursing facility stay does not meet state statute for residency), their retirement income and social security income is not taxed in the state.  No nonresident state is allowed to tax retirement income by Federal Law.