I made the majority of my income while living out of state. Now Nyc is charging me a huge penalty on that out of state income. Is there anything I can do?

[matthewtjarosz]

I have a residence provided through my school which I keep as a sublet for the entire year. Prior to school I was a resident so I continued to file as a resident, partially out of fear that as a non-resident I would lose my eligibility for health insurance. Since it is a  school provided residence, could I claim non-resident and list my parents house in Massachusetts as a permanent residence? I am entirely unclear if that is fraudulent or fine as the school residences seem to be an exception.
Thanks.

[Anonymous_]

@Critter-3 

[TomD8]

Your residency for state income tax purposes is determined by state law.

In order to answer your question, we need more details:

In what state is your main, permanent home (your domicile in tax terminology)?

In what state(s) did you actually reside in 2023, and for how long?

In what state did you work in 2023?

If a student, are you in an undergraduate degree program, or a graduate degree program? (NY's "exceptions" apply only to undergrads.)

[matthewtjarosz]

Thank you.

So I have been a resident of NYC for the last five or so years. Resident as in living in an apartment.

I am an undergrad living on campus at the school and that is my only residence; that is in nyc.

• During the summer, I sublet my room on campus, and work seasonal work for three months in Massachusetts.

So, I have lived from mid may until September in Massachusetts, paying a separate rent. Meanwhile,someone else was living in my residence as a sublet. So, I have retained that residence in this way for three years of undergrad.

[TomD8]

"So I have been a resident of NYC for the last five or so years." 

It sounds like New York is your state of domicile.  You can read NY's definition of domicile here, to see if you agree:

https://www.tax.ny.gov/pit/file/pit_definitions.htm

Note that you can only have one domicile at a time.  Also, NYS and NYC have the same residency criteria.

If NY is in fact your domicile, then ALL your income is taxable by New York.  In this case the income you earned in MA would also be taxable to you as a non-resident by MA.  In that situation you would file both a non-resident MA tax return and a resident NY tax return.  You would be able to claim a credit on your NY tax return for the tax paid to MA, so you wouldn't be double-taxed.

But if you wish to claim MA as your domicile state, then you must meet MA's criteria for that claim.  These are detailed here:

https://www.mass.gov/info-details/learn-about-legal-and-residency-status-in-massachusetts

Be aware that both states can conduct residency audits.

If you feel you can legitimately claim MA as your domicile, then the issue becomes whether or not you are also a NY resident by NY's 183-day "permanent place of abode" rule.  Undergrad students may qualify for an exception to this rule.  The exception is detailed here:

https://www.tax.ny.gov/pdf/memos/income/m09_15i.pdf

If you are a legitimate domiciliary resident of MA, and you meet NY's undergrad exception, then you would have to file a non-resident NY tax return if you had NY-source income.  ALL your income would be taxable by MA.  (Rental income from a dwelling located in NY would be NY-source income.)

So the first thing you have to decide is this: Which state is my state of domicile, according to the laws of each state?  

[matthewtjarosz]

Okay, so it's clear that I'm a resident then. The only unclear thing, and I believe this has been costing me thousands of dollars, is the residence credit.

It is almost hidden on TurboTax NY state credit menu. In fact, I can't find it so I do not know if it exists or it requires a higher tier specialist to tab me into it.

My last question would be how to access the residence credit.

Thank you again.

[TomD8]

As a resident of NY:

In TurboTax, you must complete your non-resident MA tax return before you do your home state NY tax return.  The program can then calculate and apply the "other state" credit.  The sequence in which you prepare the state tax returns is critical.

[Critter-3]

If you follow the interview screens as directed in the MY INFO section you would indicate you are a resident of NY and have income from MA.  Then when you get to the STATE tab the MA return is listed first and then the NY ... complete them in the order presented to get the proper credit. 

If you do not complete them in the proper order you will need to provide the NY interview with the MA tax info needed for the credit.