Claiming Domicile in PA & Statutory Residency in DC

[AmyWillow]

I am claiming domicile in PA, but maintain an apartment in DC.  Since I intend to spend than 183 days at the apartment in DC a year I believe I have to claim statutory residency in DC.  Will my income be taxed twice? 

[ErnieS0]

Yes. Your income will be taxed twice but you can claim credit on your D.C. return for tax paid to Pennsylvania.

The DC Official Code describes a statutory resident as any individual who maintains a place of abode within the District for an aggregate of 183 days or more during the taxable year, whether or not such individual is domiciled in the District.

The District allows credit on income and fiduciary tax returns for taxes paid to other states on incomes taxed by the District. However, the amount of the credit may not be equal to the amount of the tax paid by the taxpayer to the other states.

Learn more at Audit Division - Frequently Asked Questions.

[axl_rose]

Does this apply to NC as well?

I have a permanent domicile and all my income is generated in NC. I own a home in VA that I spend less than 183 days a year at. I have NO income generated in VA.

Do I need to file in both states AND will I be taxed twice?

[ErnieS0]

No you do not need to file a Virginia income tax return—and no—you will not be taxed twice.

Your situation is different. Your permanent domicile is North Carolina and all your income is generated in the Tarheel state. Therefore, you have no VA income. And do not need to file a VA return.

@AmyWillow had a permanent home in Pennsylvania but earned income in Washington D.C. On top of that, D.C. enacted special rules about statutory residency.

[jfspann]

I am a federal employee but was on a detail in DC for over 183 days in 2018. I had an apartment in DC, but all my income was generated in Alabama. I paid state taxes in Alabama for 2018. Do I owe taxes to DC for 2018?

Jim

[DanielV01]

It depends.  First, it is important to identify that you are a statutory resident of DC.  You had an apartment (maintained an abode or a dwelling), which is one of the elements to the definition of a statutory resident, and you state that you had a detail in DC for 183 days, which appears to be a second element. But the true definition of a DC statutory resident requires that you are physically present in DC.  Likewise, for Alabama to tax your income, you needed to be physically working in Alabama.  (Alabama does not tax telecommuters working "at home" from outside of Alabama, for instance).  It seems difficult to believe that both of those conditions are true.  It is very possible, in fact, that you may have to prorate or allocate your actual income to Alabama based on the amount of time and work you physically performed there.  Alabama cannot tax all of your income unless it was all earned there.

Having said that, let's say that you do meet both conditions of the test.  If you do, then you may technically need to file three "state" returns:  An Alabama nonresident return for all income you earned in Alabama, then a DC resident return on all of your income (on which you will claim a credit for income earned in Alabama), and then a Pennsylvania resident return on all of your income.  Since PA is your domicile state (where your main home is located), then Pennsylvania also has the right to tax all of your income.  In this case, Pennsylvania would give you a credit for tax paid first to Alabama, and then to DC on this income that is being taxed there.  Still, since PA law includes some items as taxable which are not taxable Federally (and likely not taxed in Alabama and DC), it is still possible that you could owe PA tax as well.

If that sounds complex, it's because it is.  What you present is not an every day resident situation.  And you may be able to simplify it by either determining that you were either not a DC statutory resident for 2020, or, if $0 was earned within Pennsylvania borders, whether you are justified in stating that your tax home for 2020 was not Pennsylvania so you wouldn't be "required" to file a tax return there.  Three returns might be safe, but if you file just two, keep documentation that will back you up in case the "state" you choose not to file with should later ask why you didn't.