When you’re a “snowbird” (someone who lives part of the year in one state and part in another), the tax rules can get a bit complex, especially if you’re spending significant time in multiple states like Colorado, Arizona, Texas, and Utah. The primary concern is determining where you are considered a resident for tax purposes, as each state has its own residency rules and tax laws. Let’s break down the tax considerations for Arizona, Texas, and Utah snowbirds living in Colorado:
Colorado Residency Rules
In Colorado, you are considered a resident for tax purposes if:
- You are domiciled in Colorado, meaning Colorado is your primary and permanent home, or
- You maintain a place of abode in Colorado for more than 6 months (183 days) during the year, or
- You have a substantial connection to Colorado (e.g., a business, family, etc.).
As a snowbird, if you spend more than 183 days in Colorado, you may be considered a resident of Colorado for tax purposes, regardless of where you file your taxes in other states.
Key Tax Consideration: If you are deemed a resident of Colorado, you will be subject to Colorado’s state income tax on all of your income, both Colorado-sourced and out-of-state income.
Arizona Snowbirds
Arizona has a similar residency requirement to Colorado but also gives snowbirds some leeway:
- Arizona Residency: Arizona considers you a resident if you spend 9 months or more in the state during the year, or if Arizona is your primary home.
- Snowbird Status: If you are a snowbird from Arizona and you are spending less than 9 months in Arizona and maintaining a residence in Colorado, Arizona might consider you a non-resident for tax purposes.
Tax Implications:
- Arizona Non-Resident: As a non-resident of Arizona, you would only be taxed on income earned in Arizona, such as rental income or business income.
- Colorado Resident: If you establish residency in Colorado, you will likely be subject to Colorado’s flat income tax on all your income, including income earned in Arizona, unless Arizona exempts it for specific sources like retirement income.
- Tax Credit for Double Taxation: If both states tax the same income (e.g., rental income or business income), Colorado may allow a credit for taxes paid to Arizona to prevent double taxation.
Texas Snowbirds
Texas is one of the most tax-friendly states for snowbirds, as it does not have a state income tax. This is a big advantage for snowbirds who split their time between states, like Colorado, where income is taxed.
- Texas Residency: Texas doesn’t have an income tax, so you won’t be taxed on any income you earn in Texas. However, Texas may still consider you a resident for other purposes, like property taxes or if you spend a significant amount of time there.
- Snowbird Consideration: Texas snowbirds can avoid income tax, but they still need to keep track of how much time they spend in Texas. If you’re spending significant time in Texas (but under the 183-day threshold for Colorado), Texas might still see you as a resident or part-time resident, but the lack of income tax gives you a bit of leeway.
Tax Implications:
- Texas: No state income tax, so there’s no worry about Texas taxing your income.
- Colorado: If you are a Colorado resident, Colorado will tax your income, even if it’s earned in Texas. You may be able to use the credit for taxes paid to other states if you have non-resident income in any state with an income tax.
- Texas and Property Taxes: If you own a home in Texas, you will still be subject to property taxes, as Texas funds its schools and local governments with property taxes.
Utah Snowbirds
Utah’s tax system is similar to Arizona’s, but Utah has a more aggressive approach to residency:
- Utah Residency: You are considered a resident of Utah if you live there for more than 183 days in a calendar year or if Utah is your primary domicile.
- Snowbird Status: If you’re spending less than 183 days in Utah and maintaining your primary residence in Colorado, Utah may consider you a non-resident. However, if you are spending 6 months or more in Utah, it’s possible Utah may try to claim you as a resident, subjecting you to state income taxes.
Tax Implications:
- Utah Non-Resident: If you are a non-resident of Utah, you are only taxed on income derived from Utah sources (e.g., business or rental income in Utah).
- Colorado Resident: If you establish residency in Colorado, you will be subject to Colorado’s state income tax on all your income, including income earned in Utah. Again, you might be able to take advantage of the credit for taxes paid to other states for Utah income.
General Tax Considerations for Snowbirds in Colorado
Establishing Primary Residence:
If you are truly a snowbird, you may need to establish where your primary residence is located. This can be tricky if you split time between multiple states. If Colorado is your primary home (even if you spend time in Arizona, Texas, or Utah), Colorado will likely claim you as a resident.
Income Tax:
Colorado’s Flat Tax: Colorado has a flat state income tax rate of 4.4% on most income. If you are a resident of Colorado, you are taxed on your worldwide income.
Out-of-State Income: If you are a snowbird in Colorado but earn income in another state, be mindful that Colorado may tax that income. However, states like Arizona, Utah, and Texas may have special rules or credits for income earned out-of-state.
State Credits for Taxes Paid to Other States:
Colorado offers a credit for taxes paid to other states. If you pay state income tax to Arizona or Utah, Colorado may give you a credit to avoid double taxation. Texas, having no state income tax, wouldn’t trigger such concerns.
Time Spent in States:
The most important factor in determining your tax obligations is how much time you spend in each state. 183 days is the key threshold for determining residency in most states, so it’s critical to track where you are and for how long.
Keep Detailed Records:
It’s essential to keep track of where you are during the year—particularly for things like voter registration, driver’s licenses, property ownership, and tax filings. Snowbird status can be difficult to prove without adequate documentation.
Summary:
Arizona: Snowbirds from Arizona may still owe Arizona taxes on income earned in Arizona but would generally be non-residents if they spend less than 9 months in the state.
Texas: Texas does not impose a state income tax, which is a major advantage for snowbirds, but residency issues could still arise in terms of property taxes or legal documents.
Utah: Utah may tax you if you spend more than 183 days in the state, but if you’re a non-resident, you’d only pay tax on Utah-sourced income.
Colorado: If you spend more than 183 days in Colorado or establish it as your primary home, you’ll be taxed on all income earned, and you’ll need to keep track of any potential credits for taxes paid to other states.
It’s often a good idea to consult with a tax professional who is familiar with the tax laws of all the states you’re involved with for compliance purposes.
