Part year residency in Kentucky

[joellevine1952]

I travel back and forth between FL and KY multiple times throughout the year. I own a house, vote, register vehicles etc in FL, but also lease an apartment in KY. In 2021 I spent less than 183 days in KY. In 2022 I spent 183 days in KY, so I was a part year KY resident for 2022. And in 2023 I also spent 183 days in KY. Was I still a part year resident of KY in 2023 and need to file 740 NP and allocate my unearned income, or was I considered a full year resident for 2023 because I spent 183 days in KY for two consecutive years and need to file form 740 and report 100% of my unearned income even though I was not there all year? And for 2023, what is my move-in date, when I never truly moved into KY, just travel back and forth to visit child and grandchild? Thank you.

[TomD8]

The relevant concept in your situation is that of domicile.  Your domicile is your main, primary, permanent home.  You are a domiciliary resident of the state where your domicile is located.  Your domicile does not change unless you abandon it in one state and establish it in another.

You can also be a statutory resident of another state for tax purposes.  For example. KY considers you a resident for tax purposes if you are domiciled in another state but maintain a place of abode and spend 183 days or more in KY during the tax year.  A person can be a domiciliary resident of one state and a statutory resident of another. 

A part-year resident is a person who moves his domicile from one state to another during the tax year.  Since you never truly moved to KY (your words), your domicile never changed from FL.  Therefore by definition you never became a part-year resident of KY. 

So:

2021: Your domicile was in Florida all year, and you spent fewer than 183 days in KY.  You were a non-resident of KY.

2022:  Your domicile was in Florida all year, and you maintained a place of abode and spent more than 183 days in KY.  You were a domiciliary resident of FL and a statutory resident of KY.

2023:  Your domicile was in Florida all year, and you maintained a place of abode and spent more than 183 days in KY.  You were a domiciliary resident of FL and a statutory resident of KY.  (You had no "move-in" date since you never moved your domicile to KY.)

Since you were a non-resident in 2021, you would only be taxed by KY on Kentucky-source income, such as earnings from work carried out in Kentucky or rental income from property located in KY.   If you had no KY-source income, then you had no filing obligation in KY for that year.

For 2022 and 2023, you would file a KY tax return as a resident.  ALL of your income, regardless of source, would be taxable by KY in those two years.  (If Florida had an income tax, your income would also have been fully taxable by FL.  Your situation is greatly simplified by the fact that your domiciliary state has no income tax.)

Section 32 of this reference has the KY definition of "resident" for tax purposes:

https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=53496

[joellevine1952]

Thank you very much for your thoughtful response. One thing troubles me, though. In 2022, had I actually changed my domicile to KY, I would have been treated as a part-year resident in 2022 according to what I read in the statutes, and only income allocated to KY, presumably excluding unearned income received while a resident of FL. So why do you believe that I should have been taxed as a full-year resident in 2022, when I have even less involvement in KY than I would've had I changed my state of domicile to KY. Seems illogical to me that the first year I spent 183 days in KY I should be considered a full year resident - although I don't have a "move-in" date.

Again, you cite a lot of good references, but your conclusion on 2022 has me scratching my head. Thanks!

[TomD8]

@joellevine1952 --

"So why do you believe that I should have been taxed as a full-year resident in 2022?"

In 2022 you maintained a place of abode and you spent 183 days in KY.  Per the Kentucky statute I cited, that makes you a resident of KY for tax purposes - albeit a "statutory" resident - for that year.  A resident of KY, whether by statute or by domicile, is subject to KY income tax on all their income, regardless of its source.

It's true that your tax obligation to KY in that year would have been less had you actually moved to KY and established your new domicile there.   That is an unfortunate quirk of the statute.  I should mention that Kentucky is not unique in this; every state with an income tax has a similar residency law. 

If you happened to be a domiciliary resident of a state with an income tax, then you would have been able to claim a credit on your "home" state tax return for the tax paid to KY.  But since FL has no income tax, there is no credit to be taken.  But you also have no income tax to pay to your home state.  There are millions of taxpayers who have an income tax obligation to more than one state.

[Hal_Al]

Why do you travel back and forth between FL and KY multiple times throughout the year and lease an apartment in KY?

Were you a KY resident prior to moving to FL?

It may matter. 

[joellevine1952]

Thanks. I began leasing an apartment in KY for the first time when my daughter (domiciled in KY) had her first child. I go back and forth to visit her and grandchild, but return to Florida to vote, doctor visits, do activities I enjoy in FL, etc. One other thing: I read in your linked document that a part-year KY resident includes an individual who establishes a KY residency (by living in KY 183 days). So in 2022, the first year I spent 183 days in KY, I established my KY residency for tax purposes, so by the part-year residency definition, I should've been considered a part-year resident that year. 2023 was just a continuation of my KY residency, in which case I can see your point about being treated as a full-year KY resident because I neither established KY residency nor abandoned KY residency in 2023. 

[joellevine1952]

Thanks. One other thing: I read in your linked document that the definition of a part-year KY resident includes an individual who establishes a KY residency (by living in KY 183 days). So in 2022, the first year I spent 183 days in KY, I established my KY residency for tax purposes, and by the part-year residency definition, I should've been considered a part-year resident that year. 2023 was just a continuation of my KY residency, in which case I can see your point about being treated as a full-year KY resident because I neither established KY residency nor abandoned KY residency in 2023. 

[TomD8 · Accepted solution]

I can see some ambiguity between sections 27 and 32 of the statute, but the words "establishes residency" normally refers to domiciliary residency.  Your domiciliary residency never changed from Florida.  Also, your situation in 2022 precisely fits KY's definition of "resident" for tax purposes.  I think that 32 is the overriding paragraph.

A change of domicile normally involves both abandoning one's domicile in the "old" state and then establishing it in the "new" state.  Some state statutes make this explicit; some do not.

Of course you're free to interpret the law as you see fit, but in the event of a residency audit I suspect KY will determine that for tax purposes you were a resident of KY in 2022, not a part-year resident.

[joellevine1952]

Thanks, again! I can certainly see merit in your argument. Agree to disagree! Section 32 is clear in making residency a question of 183 days, not of location of domicile, since it states that domicile doesn't matter for determining residency. Therefore, for me at least, the section 27 discussion of residency is really about the 183 days criterion, and not about location of domicile. But as you say, it isn't 100% clear. I thank you for your generosity in sharing your expertise.