Out-of-state property owners could be hit with more taxes

February 11, 2011 09:30AM

Out-of-state residents with a Hamptons summer home or a Manhattan pied-a-terre may soon be paying more tax dollars to the state of New York, the Wall Street Journal reported. Last month, a court ruled that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million. Tax experts and real estate brokers say this ruling could increase tax bills for the thousands who own New York City apartments that they use only occasionally. It could also affect sales in the Hamptons and other communities with vacation homes.

“People will think twice about spending any summer time in New York,” said Robert Willens, a New York-based tax consultant. “The amount of tax they could be subjected to is likely to outweigh the benefit.” A spokesperson for the state Taxation Department issued a statement that said it was “pleased” with the decision. “However, these cases are fact-intensive and as such each case stands on its own specific fact pattern,” the statement said. Although the law requires residents of another state who spend more than 183 days a year in New York to pay taxes on any income they make in the state, those people generally haven’t had to pay taxes on income they make outside of the state or on their spouses’ income if they work elsewhere. [WSJ]