Ohio's Residency Requirements for Individual Income Tax Purposes

By Thomas J. Ubbing, Attorney, Tax - Business & Corporate

Why Does Residency Status Matter?

An Ohio resident must pay Ohio income tax on his or her worldwide income (including investment income (i.e., dividends, capital gains etc.) and pass-through income from LLCs and S corporations with operations outside of Ohio), subject to credits for taxes paid in other jurisdictions. A nonresident, however, only pays Ohio income tax on income earned or received in Ohio (e.g., wages earned in Ohio and pass-through income from LLCs and S corporations with operations in Ohio).  Under these rules, an Ohio resident can save substantial taxes by changing his or her residency to a State with no income tax, such as Florida, Nevada, Texas or Wyoming.

Who Is a Resident?

Under Ohio law, an individual is a “resident” for Ohio income tax purposes if he or she is “domiciled” in Ohio. Whether an individual is domiciled in a State other than Ohio depends upon whether: (i) he or she has taken affirmative steps to change domicile (e.g., obtaining out-of-state driver’s license in the State in which domicile is claimed, changing Ohio club memberships from resident to nonresident status, and registering to vote in the State in which domicile is claimed); (ii) he or she has a residence in the State in which domicile is claimed; and (iii) the number of “contact periods” the individual has in Ohio during the year.  A “contact period” occurs when an individual is away from his or her out-of-state residence and spends a portion of two consecutive days in Ohio.  In most circumstances, this will be the number of nights the taxpayer spends in Ohio during the year.

How Can a Taxpayer be Assured “Non-Resident” Status?

Fortunately, under Ohio law, a taxpayer can be assured “Non-Resident” status for the year 2015 and following tax years if he or she meets all of the following requirements:

(i)    the taxpayer has a residence outside of Ohio for the entire year;
(ii)   the taxpayer has no more than 212 contact periods during the year; and
(iii)  on or before April 15 of the following year (or such later date as may be extended by the Tax Commissioner), the taxpayer files with the Tax Commissioner an Affidavit of Non-Ohio Residency/Domicile (Ohio Form ITDA-NM), and such Affidavit is true and correct.

If questioned by the Tax Commissioner, the burden of proof is on the taxpayer with respect to the number of contact periods during a tax year.

What If I Fail to Meet All of the Requirements to be Assured “Non-Resident” Status?

A taxpayer who fails to meet all of the requirements to be assured “Non-Resident” status is presumed to be an Ohio resident for the entire taxable year, even if the only requirement not met was the filing of the required Affidavit. Such presumption can be rebutted, but the burden of proof is on the taxpayer.