How Do Taxes Work If You Snowbird?

For many retirees, it’s inevitable. The urge to escape ice and snow each winter is often too great to ignore. However, uprooting your life entirely in order to live somewhere warm and sunny year-round may not be an option. Family, friends, pets, and a community you love may continually pull you back to your roots (even if the winters are less than favorable!). The solution that some retirees pursue is to adopt a “snowbird” lifestyle. Just like birds do, these retirees fly south for the winter months to a second residence that they own. 

This lifestyle may sound ideal if you hate the cold, or just want to experience another location for half the year. However, it comes with potential financial ramifications. Preparing for the expense of having two residences, and planning ahead for taxes, can help you make the transition to being a snowbird smoothly. 

Understanding How to Manage Two Residences

There are a wide range of expenses that crop up when managing a home. When you purchase a snowbird residence to act as a second home, those expenses double and new considerations come into play. For example, you may face expenses of winterizing your home up north, costs of having a caretaker watch one (or both!) of your residences while you’re away. 

Additionally, travel expenses can quickly add up if you’re going back and forth, and hosting guests in your winter home can also be an unexpected cost of living somewhere travel-worthy. It’s worthwhile to speak with someone who has been, or currently is, a snowbird to better understand what you may be facing. Alternatively, connecting with a financial planner who has experience helping retirees pursue this type of lifestyle can help you clarify your goals.  

What Determines Where You Owe Taxes?

One of the biggest financial considerations snowbirds face is taxes. Determining where you owe taxes can feel complicated when you’re living part-time in two different locations. Here are a few things to think about:

1. You will eventually need to decide which residence you consider your “domicile.” Your domicile determines which residence you consider to be your fixed, permanent home. You are taxed State and Local Taxes (SALT) in the state where your domicile is located. 
2. Understand what each state requires as far as taxes go. Every state is different. Some may have taxes at the local and state levels. Other states may not have any personal income tax at the state and local levels. 
3. Navigate changing your domicile. Changing your domicile from one state to another requires changing your license, public address, voter registration, and sometimes even where your dog or pets are registered. This process can be a challenge, and you’ll want to know what’s required from both the state you’re leaving and the state you’re changing to before proceeding. 

How Can You Make Snowbirding Work For You?

Speaking with a financial advisor can help you to navigate the various tax implications of snowbirding, and changing your domicile. You may, for example, decide to snowbird to a state with lower taxes than where you currently live if you’re planning to make your new home your domicile. 

Want to learn more? We’d love to help! We are here to help pre-retirees and retirees plan for their ideal lifestyle. 

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.