Dual PA and DE taxes

Adarsh.Sethi · Joined: 24 Feb 2008 Posts: 1

My son was a resident of DE until the middle of last year when he
obtained a job in Bethlehem, PA. He then rented an apartment in
Whitehall, PA (near Allentown) and he now spends the work-week there.
However, he comes to Delaware for the weekends as he runs a small
business here. For business purposes as well as for convenience, he
wants to keep his residency in Delaware. I have two questions related
to his situation:

1. Is it OK for him to file a resident tax return for Delaware and a
non-resident return for PA? Can he continue this arrangement for
future years as well, even though he is renting an apartment in PA? He
is maintaining his permanent address in DE. Is such an arrangement
good for him for tax purposes (his income from his job in PA is much
more than his income from his business in DE)?

2. He has received notices of township tax from both Bethlehem, PA and
Whitehall, PA. Is he required to pay these taxes? If he claims to be a
non-resident for PA, can he claim that his apartment in Whitehall is
not his primary residence and thus avoid the Whitehall township tax?

Thanks!

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Archived from group: misc>taxes>moderated

Katie · Joined: 25 Aug 2007 Posts: 94

On Feb 23, 8:04 pm, Adarsh.Se...@gmail.com wrote:
> My son was a resident of DE until the middle of last year when he
> obtained a job in Bethlehem, PA. He then rented an apartment in
> Whitehall, PA (near Allentown) and he now spends the work-week there.
> However, he comes to Delaware for the weekends as he runs a small
> business here. For business purposes as well as for convenience, he
> wants to keep his residency in Delaware. I have two questions related
> to his situation:
>
> 1. Is it OK for him to file a resident tax return for Delaware and a
> non-resident return for PA? Can he continue this arrangement for
> future years as well, even though he is renting an apartment in PA? He
> is maintaining his permanent address in DE. Is such an arrangement
> good for him for tax purposes (his income from his job in PA is much
> more than his income from his business in DE)?
>
> 2. He has received notices of township tax from both Bethlehem, PA and
> Whitehall, PA. Is he required to pay these taxes? If he claims to be a
> non-resident for PA, can he claim that his apartment in Whitehall is
> not his primary residence and thus avoid the Whitehall township tax?
>

Your son cannot avoid being taxed as a resident by PA at the state and
local levels if he maintained a permanent place of abode (e.g., an
apartment) in the state and spent more than 183 days of the taxable
year in the state. He may be able to be considered a nonresident for
2007, but if he is in PA for more than 183 days in 2008, he will be a
resident subject to tax on all of his income, from all sources. Of
course, as a nonresident, he is subject to both state and local tax in
PA on his PA source earnings. The Whitehall township tax applies to
both residents and nonresidents.

He is a Delaware resident for tax purposes if he is domiciled in DE,
or maintains a place of abode and is present in DE for more than 183
days of the taxable year. In order to change domicile, generally a
person must meet all of three requirements: (1) move away from the
previous domicile; (2) move to and reside in a new location; and (3)
intend to remain in the new location permanently or indefinitely.
Usually, unless all three requirements are met, the previous domicile
continues. As a result, your son may be in the uncomfortable position
of being a domiciliary resident of DE and a statutory resident of PA
at the same time. As a result, both states will tax all of his
income, from all sources. Fortunately, DE will allow him credit for
the tax he pays to PA on his PA earnings (though not for the local PA
taxes). If he is taxed as a resident by PA, PA will allow him credit
for the taxes he pays to DE on any DE source income (e.g., income from
a DE business), and possibly even for taxes paid to DE on income from
intangibles.

Katie in San Diego

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