Recently a New York State Tax Appeal Tribunal upheld an administrative law judges ruling on a 2009 tax case regarding a unique interpretation of what constitutes a permanent residence. The decision was based on the fact that, though the home was occupied only a few weeks a year by the owners, it could have been lived in all year round. Simple enough, except that the owner lived and worked in another state and had not been complying with the New York state income tax regulations. Simple but a real game changer.
The basics of the case are as follows: A Connecticut couple bought a second home for vacation use on Long Island for approximately $260,000.00 some years ago. During their ownership they complied with all tax laws regarding mortgage interest and property tax deductions based upon their minimal personal use. New York state income tax had been assessed only on the husbands income earned while working in New York. With this new ruling, the couple has been found to have been in non-compliance with the New York State Tax Code, and the state has made an additional demand regarding income earned by both husband and wife outside of NY. This additional tax bill amounts to $1.06 million.
New York tax experts say this ruling is a complete departure from how summer second homes have been treated by NY. It has the potential to raise the tax bill for thousands of second home owners in the city and other vacation home areas in the state.
Last weeks analytic report numbering visits to the Spencer Hughes website showed gains in the number of inquiries from Connecticut, Massachusetts and New Jersey residents. Small surprise to me, for I expect an increase of inquiries to New Hampshire, which has no state income tax, should this interpretation be applied to out-of-state second home owners in the Catskills, Finger Lakes, Adirondacks and Thousand Islands areas. And the possibility of other cash-strapped states adopting the NY ruling is also very real. This would certainly provide support for second home property values in our state.
Jim Ferriman
