Recently, an appeals court ruled that out-of-staters with New York vacation homes don’t have to pay income taxes as if they lived in them full-time. In a ruling that shocked tax experts, the Appellate Division overturned a longstanding, counter-intuitive state rule. In determining whether someone spends more than 183 days in New York, any part of a day spent in the state is counted as a full day living in the state. Vacation-home owners and their accountants have long accepted it as something they had to live with, absurd as it was.

Enter Nelson Obus, an investor and New Jersey resident who commuted to work in New York City and had a vacation home in upstate New York, four hours away from New York City. Obus visited the second home a few weeks each year, but the state of New York counted his workdays in the city as “lived” in the state. Obus decided to challenge the system. It wasn’t a straightforward process. He had to go through an administrative law judge and was denied. He then took his case to the Tax Appeals Tribunal, but they sided with the state as well. Obus then went to the Appellate Division. The judges ruled unanimously in Obus’ favor, denied the state of an automatic appeal, and even ordered the state to pay Obus’ court costs. With this ruling, vacation homeowners in New York, may be able to escape the 183-day test and avoid paying New York income tax.

About the Author

Giancarlo Revilla is an Accountant in the SobelCo Tax Practice. Giancarlo’s primary focus is tax services and compliance issues in the real estate and food & beverage industries.

For more information contact Giancarlo Revilla at giancarlo.revilla@sobelcollc.com.

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