Help!!!

[nurse_seavey]

I am having anxiety for this upcoming tax season. I typically do them on my own, but have had a lot of changes and don't know where to start! 

Situation: My husband and I are both Alaskan Residents. We moved to Maine for my schooling, and bought a house (and car). I still work remotely for Alaska, but my husband got a local job in Maine. My job requires that I stay an Alaska resident, but the house and car in Maine are in my name. To complicate things, we also rent out a room in our Maine house through airbnb. We do still have a residence in Alaska, voter registration in Alaska, Alaska driver's licenses, and one vehicle registered there. 

Questions: Can we claim Alaska as our residency for taxes??? If so, how do we work all of the Maine assets and income into the equation??

Any information you have would be so greatly appreciated, I'm pulling my hair out trying to figure all this out!! @taxes

[Opus 17]

You have several issues to go over.

First, where is your domicile?  Your domicile is your "true" home.  You can be domiciled in Alaska even if you live out of state for many years.  There is no single factor that determines domicile, but some factors include the location of your job, your home (leased or owned), your car and voter registrations, your church and other significant social relationships, and your significant professional relationships (doctor, lawyer, etc.). To establish a new domicile. you also have to take steps to abandon your previous domicile.

This is what Maine says about residency and domicile.

https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/residency_guidance_2020.pdf

Secondly, even if you consider yourselves to be domiciled in Alaska (and that is a close question given your description so far), you can be a legal resident of Maine for tax purposes, generally if you lived in the state for more than half the year (more than 183 days).  If less than half, you are a non-resident and would only report Maine-sourced income that you and your spouse earned while living or working in Maine.  If you are a resident, you would file a part-year resident return, which reports all your world-wide income earned after you became a Maine tax resident.  (This makes less difference than it seems.  If you are physically living and working in Maine, your income is Maine-source even though your employer is out of state.)

Your situation is somewhat simplified because Alaska does not have a state income tax, so you don't have to figure out how to offset that.  You would just file a part-year Maine resident return using the date you moved as the start date of your Maine residency (if more than 183 days) or a non-resident return (if less than 183 days). 

As to whether you are still an Alaska resident for your job, that will be up to your employer.

[nurse_seavey]

Thank you Opus17! I am still a little confused, but your response is much appreciated! We consider Alaska our domicile. As far as residency goes, we moved to Maine in January and have been here the entire year. We bought the house in June, which seems to be the biggest factor in residency for taxes. I'm trying to figure out a way to stay an Alaskan resident for taxes (for my employer). Any ideas? Do you think it's possible for me to claim non-residency and my husband to claim residency? Or am I just hoping against hope here...?

[Opus 17]

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@nurse_seavey wrote:

Thank you Opus17! I am still a little confused, but your response is much appreciated! We consider Alaska our domicile. As far as residency goes, we moved to Maine in January and have been here the entire year. We bought the house in June, which seems to be the biggest factor in residency for taxes. I'm trying to figure out a way to stay an Alaskan resident for taxes (for my employer). Any ideas? Do you think it's possible for me to claim non-residency and my husband to claim residency? Or am I just hoping against hope here...?

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Read the Maine residency document.  Even if you are not domiciled in Maine, you are clearly a statutory resident of Maine (you lived in the state more than 183 days and you have a permanent place of abode).  The facts that you describe would not support a claim that you were a non-resident.

I don't understand what you mean by "figure out a way to stay an Alaskan resident for taxes (for my employer)".

If you are talking about your state income tax withholding, that bridge has long since been crossed.  You will owe Maine income tax on all your world-wide income, beginning on the date in January that you moved to Maine.  If you did not have Maine tax withheld, you will owe a big tax bill when you prepare your return.  This is because you are a statutory resident of Maine even if you are not domiciled there.

If you are talking about some other legal provision involving your employer (such as, your employer gets special treatment for employing Alaska residents) you will have to discuss with them whether you can continue to call Alaska your domicile and whether that is enough for your employer.  

[nurse_seavey]

I guess I was referring to the document you sent, example 3:

Example 3 – Nonresident. David is domiciled in New York. He is transferred to his employer’s Maine
office for a temporary assignment from March 1 to November 30 (274 days), after which he returns to New
York. Although David takes an apartment in Maine during this period and he is not a Maine resident, he
spends more than 183 days of the taxable year in Maine, he is not a Maine resident because he did not have
a permanent place of abode in Maine for the entire year. Instead, David will be subject to tax as a nonresident
on his income from Maine sources, including any salary or other compensation for services performed in
Maine.

Because we did not have permanent residence in Maine the entire year, could we qualify based on this example? Or would it be non-resident until June, and the Statutory resident from June-December? I guess I was hoping that maybe my husband could claim the house and therefore statutory residency, and I could claim nonresidency (if we filed separately) to appease my employer and avoid paying taxes on worldwide income. I surely didn't think being a student in Maine would come with so many taxes!

[Opus 17]

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@nurse_seavey wrote:

I guess I was referring to the document you sent, example 3:

Maine.

Because we did not have permanent residence in Maine the entire year, could we qualify based on this example? Or would it be non-resident until June, and the Statutory resident from June-December? I guess I was hoping that maybe my husband could claim the house and therefore statutory residency, and I could claim nonresidency (if we filed separately) to appease my employer and avoid paying taxes on worldwide income. I surely didn't think being a student in Maine would come with so many taxes!

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Maine's definition of "permanent place of abode" is unusually restrictive compared to other states.  Maine says you must maintain the place as your home the entire year; most other states would consider an apartment you leased or a home you purchased as a "permanent place of abode" even if you did not live in it the entire year.  (Leasing an apartment or buying house would be a "permanent abode" in most states, to be distinguished from living in hotels or in a friend's spare bedroom.)

That being the case, you would file your 2021 return as a Maine non-resident.  See further FAQ #1 and #4 on this page.

https://www.maine.gov/revenue/faq/individual-income-tax#faq1040_4

[nurse_seavey]

Opus17, thank you so much for your time and assistance with this matter. Your help has been invaluable! I really appreciate your advice.