Multi-State Tax Planning for Retirees: A Guide for Ohio’s Snowbirds

After decades of braving those famous Ohio winters, it’s easy to see the appeal of heading south when the first frost hits. But if you’re looking to enjoy warmer weather all winter, it’s essential to understand how your migration may impact your tax burden each year. Between state residency rules, income-tax differences, and property filings, several snowbird tax considerations can impact how much you owe, and to which state.

Understanding Snowbird Residency Rules

Every state wants its share of tax revenue, which is why understanding the definition of “residency” is essential for those living in multiple states.

Most states use what’s known as the 183-day rule to determine residency status. If you spend more than half the year (183 days or more) in that state, you could be considered a resident for tax purposes.

Say you divide your time between Ohio and Florida, spending about 9 months in Ohio and the remaining 3 in Florida. Because you spend more than 183 days a year in Ohio, the Buckeye State can claim you as a resident and tax your worldwide income—even though Florida has no state income tax. 

Keeping track of exactly how many days you reside in each state is crucial, as it can prevent you from incurring unintended tax consequences.

How Does Ohio Tax Your Retirement Income?

States differ widely in how they treat retirement income sources. For reference, here’s a quick look at Ohio’s tax treatment of familiar retirement income sources:

Social Security benefits: Ohio does not tax Social Security income.

401(k) and IRA distributions: These are generally taxable at the state level.

Pension income: Treated as ordinary income in most states, though Ohio provides partial exemptions.

Investment income, including interest, dividends, and capital gains, is taxed based on residency status and the location of the investments.

If you split time between two states, your tax picture can get complicated quickly. You may need to take specific actions, including:

• Filing part-year resident returns
• Allocating income between states
• Claiming available credits to avoid double taxation

You may find it helpful to work with a financial professional who understands multi-state taxation, as they can help ensure you don’t pay more than necessary in taxes.

How Popular Snowbird Destinations Tax Residents

While Ohio taxes most forms of income, let’s take a look at how some popular snowbird destinations tax as well:

Florida: With no state income tax (and lots of sunshine), it’s no real surprise that Florida is such a popular winter destination for Ohio residents.

Arizona: Arizona taxes income, including most retirement distributions; however, the state offers exemptions for Social Security and certain pensions.

Texas, like Florida, has no state income tax; however, higher property taxes are more common.

Keep in mind, a warmer state’s “no-income-tax” status can be appealing, but your overall cost of living still needs to be part of the equation. 

No Income Tax Doesn’t Mean No Filing

Some snowbirds assume that moving to a state with no income tax means they’re off the hook for filing altogether. 

Even if your new state of residency doesn’t collect income tax, you may still be responsible for filing part-year resident returns or paying other taxes, such as property taxes or local assessments. Failing to file when required can result in penalties or missed opportunities to claim credits. Before tax season rolls around, verify your filing obligations with a tax professional who’s familiar with multi-state tax rules.

Thinking of Changing Your Residency?

If you spend most of your time in another state, consider officially changing your domicile. Domicile is your true, fixed, and permanent home—the place you intend to return to and remain. You can have multiple residences, but only one domicile is recognized.

To establish domicile in another state, you’ll need to demonstrate intent through documentation. While there’s no set process, the typical steps include:

• Update your driver’s license and vehicle registration.
• Register to vote in your new state.
• Change your mailing address with banks, investment custodians, and the IRS.
• File for the homestead exemption (if you buy a home in the new state).
• Update estate planning documents to reflect your new primary residence and governing laws.

Remember to Keep All Documentation

As basic as it is, staying organized with your records can be one of your best lines of defense against residency audits. Keep thorough documentation that supports where you spend your time throughout the year.

Keep records of utility bills, receipts, or travel documents that can verify your location on specific dates. Bank and medical statements should also reflect your primary address, which can help keep things consistent. Even airline tickets or credit card statements can serve as valuable proof of your movements between states.

If your domicile claim is ever challenged, having a thorough paper trail will help confirm your intentions and living patterns. Otherwise, inconsistent or missing documentation may trigger a lengthy and stressful audit.

Ready to Head South for the Winter?

If you’re daydreaming about sandy beaches or sunny days, heading down south for the winter may not be a bad idea—just keep in mind that some multi-state tax planning could be required.

As a fiduciary financial advisor, Michael Brady & Co. can help you navigate these complexities and develop a tax-efficient snowbird plan. Schedule a consultation to get started today.