2018 Ohio Residency Tax Law Changes: What You Need to Know

Published:

Authors:
Howard Essner, JD, General Counsel, Family Wealth & Retirement Plan Advisor


Late in 2018, Ohio’s legislature made some changes to rules regarding when someone can claim residency in another state while still maintaining a home in Ohio. These rules provide a “bright line” test that should provide assurance that the State cannot challenge non-residency for someone who meets these 5 tests and who files the appropriate tax forms. The stated purpose of the changes was to avoid the confusion created by conflicting rulings from the Ohio Department of Taxation, and therefore is welcome news.

Starting with years after January 1, 2018, anyone who meets these five tests for a calendar year is presumed not to be a resident of Ohio.

  1. The person owned at least one residence in another state for the entire year for which he or she did not claim depreciation under Section 167 (i.e., not a rental property or other business use of the property).
  2. The person has no more than 212 “contact periods” in Ohio. The definition of a “contact period” remains the same as prior law and is defined as any two consecutive days in which the person is away from his or her principal out-of-state residence overnight and spent any part (no matter how minimal) of two consecutive days in Ohio.
  3. The person did not have a valid Ohio driver’s license or State ID for the entire year.
  4. The person did not claim or receive a real property tax reduction-based residency (e.g., a homestead property exemption or the owner-occupied tax reduction) for the year.
  5. The person did not receive in-state tuition in any Ohio college based on a residence in Ohio for the year.

Under the new rules, anyone claiming non-residency must file an Ohio Form IT NRS every year in which he or she maintains a residence in Ohio. This form replaces the old Ohio Affidavit of Non-Residency, which is no longer used. The IT NRS is due by October 15 of the year following the close of any year in which non-residency is claimed. The form can be filed jointly, but if only one spouse is claiming non-resident status, that person can file the form individually.

A few notes about the new rules:

  • The requirement that someone not receive an Ohio homestead property tax reduction is very important. Not only will the receipt of this exemption cause the failure of the test, but it could lead to a loss of a similar exemption in the person’s home state (along with interest and penalties). Some states, including Florida, are very aggressive in their enforcement of these rules.
  • Ohio’s new residency rules generally don’t apply to any taxable year in which the taxpayer permanently moves in or out of Ohio. In this case, part-year resident allocations continue to apply.
  • The State can only challenge a claim of non-residency if it can show that any of the five criteria have not been met or the individual fails to file the proper form. However, if the State challenges the number of contact periods, the person must prove the time in and away from Ohio by the preponderance of evidence. This means that it is still very important to keep accurate records of your travel in and out of the State.
  • The test for in-state tuition applies only to the individual claiming non-residency status, but not to his or her dependents, who can get the in-state tuition based on their own residency status.

If you are thinking about establishing a domicile or residency in another state, or have any questions about this article, Ancora can help with the decision-making process. Please contact your relationship manager for further discussion.

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