Everybody knows that life in Alaska is going to look very different than life in Florida, but climate is not the only factor involved in the matter. Where you live is called, in legal terms, your domicile, and it determines many aspects of your life. These range from where you can be sued to how much you pay in taxes. That's why it's important to know the factors that determine your domicile, also called your legal address.
What is Domicile?
Where you actually live and where the law says you live can be two different things. Of course, where you live and where you consider home may be two different things. So what, exactly, is domicile?
Domicile lines up more with your idea of home than where you happen to live at the moment. In fact, domicile can be defined as the state you consider to be your permanent place of residence. It doesn't have to be the place where you are currently living, but you have to intend to return to it and live there indefinitely at some point in the future.
Think about a college student who considers a small town in California to be home but is currently studying medicine in Chicago. For legal purposes, California is her domicile. Or a couple with houses in Oregon and Arizona, who spend more time in Tuscon but think of Portland as "home." Their legal domicile would be Oregon, but some state laws may deem it to be Arizona..
Figuring out Domicile
Not every case is easy. When determining a person's legal domicile, the courts consider various factors including:
- the state where you live
- the state where you vote
- the state your driver's license is from
- the state in which you register your vehicle
- the state where your spouse (and kids, if any) live,
- the state you list on your federal tax returns
- the state in which you file state tax returns
But the main factor is your own, personal intent. Domicile is fundamentally a question of which state you consider to be your permanent home. There are, however, some objective actions you can take to prove your subjective intention. A major point here is taxation. In some states, if you stay more than 183 days per year, you are deemed to be a resident for tax purposes. If you have more than one residence and there is a legal battle to determine your domicile, it will turn on this type of tax evidence to decide where should be considered your permanent home.
Legal Issues About Domicile
Legal questions about a person's domicile usually arise when a state tries to tax income or a probate estate, and the taxpayers argue that they are (or the person who died was) domiciled elsewhere. The taxpayers must go to court and ask for a ruling that their legal domicile is elsewhere.
Domicile counts in state income tax and probate matters. Many states impose a tax on income earned by those who work in and/or are domiciled in the state. If you just work in a state, you have to pay state income tax only on the income earned from sources in that state. If you are domiciled there, you pay tax on 100 percent of your income.
Likewise, some states have their own taxes on assets left when a person dies. If a family member dies, the person's legal domicile can tax the assets, while other states cannot. If it turns out that the family member was domiciled in a state with an estate tax, you, as an heir, may have to pay an estate tax bill you wouldn't have to pay if you can prove the person was domiciled in a state without such a tax.