What are the various options for retirees looking to relocate or snowbird during the traditional "snowbird season"? What are the tax consequences of relocations or spending time in another state?
Changing residency from Minnesota or Wisconsin to another state involves many different issues, only one being the income tax and other state tax consequences. Each state has a unique tax structure involving income, estate, sales, and real estate taxes.
Retirees shouldn't assume a high state income and/or property tax burden (MN and WI) will continue in retirement. The annual income tax bill should drop for most retirees upon retirement. Many Minnesotan's receive a bigger property tax refund after they retire. Both of these factors should be factored in before making a decision based only on tax considerations.
Medicare supplemental insurance options vary widely from state to state, another issue that needs proper research before relocating permanently.
Minnesota and Wisconsin residency will generally continue after retirement for most snowbirds who spend at least 183+ days in their "home" state. Other factors include property ownership, motor vehicle licensing and insurance, voting, health insurance, etc. It is possible to retain home ownership in your state of "origin" and change residency. In Minnesota, this would involve changing your homestead to "non-homestead" status which results in a change in the property tax status and levy.
Many retirees move into a much lower income tax bracket after retirement, making income taxes a non-issue on the subject of residency and possible relocation.
Here is a very brief (and incomplete) overview of some of the most popular options:
Full relocation. Many folks dive in "head first" and move "lock, stock and barrel" to their desired new home. For the uninitiated, this can be a financial disaster if things don't turn out as expected. It is very expensive to sell and rebuy a home, move, and set up in a new location.
Traditional Snowbird. Popular destinations include Florida, The "Valley" in the tip of Texas, and Arizona. The beauty of the snowbird lifestyle is that one doesn't have to give up ties back home and gets to enjoy the beautiful Spring and Summer months in the Midwest. (Heat waves have been on the rise and summer temperatures in all of the snowbird destinations can be unbearable).
Within the snowbird category, options abound.
RVing is very flexible allowing retirees to explore many different areas without any commitment.
Buying a "Park Model" or trailer in a traditional snowbird park is generally inexpensive with only a year to year commitment of paying "lot rent" in the "leased land" parks.
Buying a "Park Model" or trailer in a "condo" or "deeded lot" park is more expensive but comes with the pride of ownership and lower ongoing annual costs since there is no "rent".
Renting often makes the most sense with regard to those who prefer a home or apartment in a sunbelt state, leaving maintenance and ownership headaches to the landlord.
The "Valley" (Mission Texas area) is generally the least expensive place to "snowbird". Lot rents and prices for park models tend to be lower in that region compared to Florida and Arizona. However, there is wide variation in prices and costs in ALL areas and shopping around is advisable.
Retirement is an exciting time and half the fun is the journey. Exploration of all options is the order of the day!
Retiree Options for Domicile and Snowbirding
Todd's Tax Service LLC
Todd's Tax Service LLC