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Residency/domicile/tax considerations for going transient

Marine Insurance/Health Insurance/Banking/Bill Paying/Taxes

Residency/domicile/tax considerations for going transient

by richardreavis » Sat Mar 25, 2017 10:24 pm

A bit of background: My wife and I live in the midwest, and are gearing up to sell our home and belongings; purchase our next boat; and move aboard. I have been retired a year, and my wife planned to leave her job late summer. But our timeline may get a turbo boost. We've been selling off belongings, scanning photos, and put our house on Zillow's "make me move". We have a very interested home buyer, and I expect an offer next week; likely a full price offer. And the prospective buyers need to move at the end of June. So, much of the 'figuring out' we knew was ahead, is here now. (We had a freakout last fall when I told someone that I was going to sell my boat in the Spring-- within a week, I had a full price cash offer from that guy. I had expected selling my current boat to be protracted thing. I am starting to think our home sale may go the same way.)

For midwesterners, we do have a fair amount of sailing/boat ownership experience. We have owned/maintained an Islander 30, on a Missouri lake, for about 28 years (2 other aux sail boats before that). And have made several charter trips as skipper, including Greece (Athens to Paros); Grenadines(St. Lucia to Union I); and many BVI milk runs. Still much to learn, but not totally inexperienced.

Anyway, we plan to relocate to someplace on the east coast, in furnished temporary housing (airbnb, etc.) in a central-ish location, where we can drive to view potential boats (~40-45'). We are hoping to land a fairly 'turnkey' boat, so that we don't start out with months of repairs and upgrades. We plan to move aboard from temp housing. Stay in a marina for the first month, perhaps 3 at most, and go transient coastal from there. As experience and confidence builds, make our way to the Caribbean. Assess and plan further from there.

And finally the question part. If you could pick the state from where to start out, what would be best. Or, best place to establish domicile, anyway. I know everyone's mileage varies. I am looking at things like taxes-- state income, property tax, sales tax. My first thought was FL is a slam dunk, but kind of choked on 6% uncapped on the purchase of say a 100k to 200k boat. 6-12k could buy a lot of something else! I'm aware that if you go up the say SC and register, FL may get you with excise tax later. Trying to weigh that one big poison pill, compared to no state income tax on my retirement income (any income).

I am not looking for the perfect tax dodge, or anything like that. Just looking to avoid major pitfalls in advance. We can/will start out from where ever "the boat" is found. But we could move it after the sale, to anywhere within reason.

Appreciate any advice I can pick up. Please know that I have been googling this topic, reading comparisons of states' domicile and tax situations; and reading relevant threads on this forum and elsewhere. Not interested in hiring a lawyer or accountant.

Thanks in advance!
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Re: Residency/domicile/tax considerations for going transien

by rickf » Wed Mar 29, 2017 7:16 am

initially, I can say, the cost of doing business?
but its not always that simple. First, Where do you plan to maintain your
residence? yes, you need one. Often, this is where your mail goes. If that
is out of Florida, you can buy a boat here and I believe you can have up to
90 days before the boat must leave the state, or register/pay. Of course, this
may mean paying tax in the state of residence, which could be worse.
Also, I think there are caps on part of the tax so check with multiple brokers
or Florida tax codes.
As my cruising adventures have now ended, I wish you the best
RickF
S/V Calaloo
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Re: Residency/domicile/tax considerations for going transien

by richardreavis » Thu Mar 30, 2017 11:01 am

Thanks for the reply RickF!

Yes, cost of doing business. I know there are probably ways to pretty much dodge all/most taxes. I am not trying to do that. But if I buy a FL boat, I might consider moving it out of FL within 90 days, and registering it elsewhere if it saves me thousands. I recognize that if I return and stay in FL more than 90 days, I could be liable for excise tax of 6%, less any sales tax paid somewhere else. And also may have to stay out of FL for the first 6 months after purchase. And there are other taxes to consider, such as property tax,and State income tax (on pension and 401k incomes).

At this point, I am just trying to bring myself up to speed and all the considerations.

We are now in the process of emptying and selling our house. We expect to be 'homeless' by late summer- early fall. But it could happen much sooner. We have just put our house on the market, by owner, and are getting lots of very interested buyer prospects. We expect to do short-term furnished house/condo rental in the SE coastal area while we look for a boat to move aboard. Stay in a marina for 1-3 months, sell our final car, and go transient.

We are currently KS residents, and there is no sales tax on purchases on person-to-person sales. But if the vessel is never actually IN KS, I don't think that will fly. Wherever the vessel IS, will expect sales tax, in-lieu-of tax, or excise tax. I see there is a stipulation about 'buying/registering a boat elsewhere and bringing it into FL within 6 months'. So perhaps I would have to avoid FL for six months after purchase. They (FL revenuers, and other states as well) seem pretty determined to get their hand in your pocket!

At this point, the boat we end up buying could be in any coastal state, or even inland state. But I am thinking oddswise-- there are a lot of boats in FL. And that may be where we take up rental residence while we boat shop.

I know we will have to keep some kind of mail address, and for some things, a physical address. This whole transient, (and in time, ex-pat) thing is very new to me. We have a relative in KS, who may fwd mail for us, at the start, anyway. I expect we will switch to a service at some point, and that will be our residence for officialdom/tax purposes.

I guess FL's 6% tax is capped at $18,000. But I am looking in the 100K - 200k price range, so the cap will not kick in, and I would owe $6k-12k in taxes. I look at SC, and sales tax is capped at $300; NC capped at $1500. Perhaps staying north of FL for the first 6 months. Or accept the gouge as cost of doing business. No State Income tax and no personal property tax on boats is an important consideration. But $6k-$12k in sales tax is a big bitter pill to swallow!

Thanks for the food for thought!
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Re: Residency/domicile/tax considerations for going transien

by rickf » Sat Apr 01, 2017 7:18 am

The boat you buy will be federally documented I would presume.
Yes, after 90 days in Florida you need to register, but you would not have state
numbers on the bow. Florida has no income tax or tax on 401K.
Good luck
RickF
S/V Calaloo
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Re: Residency/domicile/tax considerations for going transien

by richardreavis » Sun Apr 02, 2017 5:58 pm

Rickf-- when you were cruising, did you keep a home? I know people do this both ways- with/without a house to go back to. We had considered first moving, buying a home in the SE coastal area. But I don't want to rent-out, or have to worry about maintenance/theft/squatting/etc. Or worry about the home gobbling up my boat budget. Once we dropped the 'house' out of the equation, it starting making much more sense for us.

Yes, I would presume that the used boat we buy will already be documented and we will transfer documentation. The Islander 30 we had in MO for many years, was documented. Same thing- had to be registered in MO and a new decal every 3 years; no state numbers, and no state title. When we sold last fall, the new owners chose to get it state titled, so it had to be deleted from documentation for that.

In the end, we will start from where ever the boat we buy is found. Most likely somewhere from the Chesapeake to Florida. Not ruling out the whole Gulf coast, for that matter. I expect to set up temp housing somewhere in the SE coastal area, and don't plan on burning up a bunch of airfare to see boats. But beyond that, we don't have any place that we 'have to' be based from. And if we buy in a state that has particularly onerous tax laws, we might switch states after purchase.

Lots to think about. We are busy now selling things out of our house. (Estate sale in the future.) My wife and I have both made peace with 'getting rid of the stuff'. Kind of liberating! I am really blessed to have a wife who is really into doing this. As much as I am, if not more! She likes to chide me about getting rid of my excess music gear (I've sold 3 guitar amps, so far!), and I chide her on her knickknacks. We are in competition regarding getting rid of stuff. Also working on USCG license, and figuring out the banking/tax/domicile/mail issues.
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Re: Residency/domicile/tax considerations for going transien

by rickf » Wed Apr 05, 2017 6:45 am

Interesting, that line, liberating. yes my wife used that exact line.
We sold everything. A little personal bit, we didn't have a lot we
purchased together having only been married 4 years. Both of us were
widowed. had this plan when the last went off to school, we'd move on
the boat. We lived in Orlando area and felt that we really wouldn't
come back to that area so we sold our townhouse and banked the money.
As for storage, we felt that very soon we would have paid again for the
things being stored. We were already Florida residents so that was easy.
We registered with St Brendan's mail service and that was home.
We didn't go there for over 9 years, but us a pretty good place there.
Well, that was 14 years ago, and sadly, we gave up the boat this past
year. And no, we didn't go back to Orlando. Friends there, and kids,
but we needed to find a place that fit us, and we have changed, so
We settled in Apalachicola Fl. a little gem for cruisers to stop by.
Funny, But I've met a couple of people that cruised by and decided to stay.
Best of luck in your pursuits.
Rick
Formerly S/V Calaloo now Calaloo Cottage
RickF
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Re: Residency/domicile/tax considerations for going transien

by richardreavis » Mon Apr 10, 2017 2:13 pm

Hi Rickf! Thanks so much for sharing your story. Hopefully those cruising years will stay in your heart always.

We've been busy running a garage sale, trying to get our house/yard cleaned out so the house will show better. My wife and I have been married for 35 years, so the "your's mine, ours" lines were blurred long ago! We last moved 15 years ago, and no doubt should have got rid of more stuff during that move. But our mantra now is: If its not going on the boat, it has to be gone! Our kids do not realize what a bullet they have dodged! So much crap they would have had to liquidate, if we'd just stayed in this house till the end.

My one respite from garage sale duty was to attend a memorial jam Saturday for a musician buddy of mine who recently passed form metastatic melanoma. Just one more reminder that the clock is ticking! A friend of ours passed at age 57, last year. I think that is when my wife started to move away from 'first buying a coastal house' to 'let's just move straight to a boat.' (I also lost a kidney to kidney cancer in 2010, but I was lucky enough to find it early(due to my wife's job in an MRI center-- that is one big IOU!), and have a spare kidney; so no chemo, no radiation, and cancer free now.)

Each of our 3 kids bought houses (started buying) last year; and all (finally) seem to be on the path to self-sufficiency. Paid off our mortgage last year. House proceeds will pay for a boat, and leave a big enough nest egg to buy another residence with/without boat proceeds. A pension we can live on. So, the stars to appear as aligned as they will ever get. We are committed to giving cruising life at least 2 years; much longer if we are having fun, and the life is working for us. When we do return to the dirt, we may try RV life for a year or two.

I think initially, my we will use my sister-in-laws address here in KC, and she will forward for us. But I expect to switch to St. Brendan's or something similar in pretty short order. The residency puzzle is a little daunting, but I am getting more comfortable with it. So many little things. I've used an email address tied to my local ISP for 15 years, so I am now figuring out all the people/places I have switch email addresses with (going to a gmail acct).

Appreciate the feedback, RickF!
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Re: Residency/domicile/tax considerations for going transien

by rickf » Wed Apr 12, 2017 8:14 am

one of the things with cruising is control over spending.
I had one monthly bill in my mail service. My healthcare was
covered by my former employer (those days are long gone).
Yes, there were times we spent heavily on the boat, but that was
a choice when we could afford those upgrades. This actually
allowed retirement savings to grow while we sailed.
Best of luck to you. it will change you for the better, and the experiences
will be most rewarding.
RickF
S/V Calaloo
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Re: Residency/domicile/tax considerations for going transien

by richardreavis » Fri Apr 14, 2017 1:16 pm

I am also one of the fortunate ones whose employer healthcare carried into retirement (federal employee). I still pay my portion, as I did when I worked; but it comes out of my pension. I know many people who only continue working, in order to have healthcare! As a post-85 fed, I participated in Social Security, so it is a three-legged thing: pension, SS, and 401k(TSP) draw. Even with my modest 401k draw, my account has still grown more that I am taking out. I believe we will have a good enough income stream to not have to worry about trying to work. I think we'll have access to 2x, 3x, some of the modest budget numbers I've seen from people. And will not be living extravagantly. Marinas to the minimum, etc.

While we hope to start out with a pretty 'turnkey' boat (no project boats-- but no boat will be 'perfect'), I know I need to plan for maintenance, upgrades, and repairs. And there may still be a few major outfitting expenses at the start.

I have kind of scrimped and saved my whole live. It is a little difficult to shift gears, and say "OK, I can spend some of that now!" And our house is paid off, so we will realize all the proceeds, with half paying cash for the boat, and half going back for an eventual move back to land. My wife and I both have major money management skills. My wife loves shopping thrift stores for bargains, and is a mean negotiator. We are piecing together a liveaboard budget. And while there are plenty of new costs; there are also many current bills that will drop away-- like the cable bill; car expenses, etc.

We are both greatly looking forward!!! But the emptying/selling of the house is getting to be a drudgery we wish was over! We can't wait.

Planning a trip to FL in the next month to take an OUPV class/test for insurance/knowledge purposes(not planning to charter). Good to do this will we still have my wife's income behind us.
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Re: Residency/domicile/tax considerations for going transien

by susanwaters » Thu Jun 01, 2017 7:13 pm

Richard,
Your post was in March, so if you've already come to a decision, sorry for being late. I think you may have to go with a 2 stage process:

For the initial purchase and shakedown cruise, I'd recommend Delaware. No tax on the purchase if you incorporate. And it's close to Annapolis MD, where you will find the east coast's largest selection of cruising boats for sale. Plus the lovely safe Chesapeake Bay is right around the corner, through the C&D canal. Note: if you bring your boat to MD for a significant period of time, they will want you to register pay sales tax. (The marinas are required to report the hailing port of vessels to the local tax authorities, but a private dock owner probably wound not).

Then when you're ready to leave the USA and head offshore, I'd recommend establishing Florida residency, but getting your USCG documented boat out of Florida before taxes are due. St Brendan's mail services are very useful for forwarding mail and establishing a Florida residency.

Hope that helps,
See you on the water,
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Re: Residency/domicile/tax considerations for going transien

by richardreavis » Thu Aug 10, 2017 10:10 am

Susan-- Thanks for the reply!!! Sorry I didn't see your post till now. I think I need to turn on notifications. Anyway, I am in here today to change my email address from one provided by my ISP, to a gmail account, as my house is selling!!!

We have been stalled out with selling our house. We have been 'for sale, by owner'. And had to work against being blackballed by the realtor mafia. But we've won that battle, and are paying NO realtor percentage! Not even a buyer's agent. And actually, the extra time has allowed to sell off stuff in a non-firesale manner.

We are signing a contract with our buyers today, and plan to close Sept 15. My wife gave notice to her job yesterday, and I've been retired 1.5 years. So, we are shifting into high gear now. To complicate matters, one of our sons decided he wants to get married before we leave. And they've told us that they are expecting their second child (our 3rd grandchild). But, I know there is no 'waiting for the perfect time'. We have our health, money to cash-purchase a boat, money for maintenance, repairs, upgrades, and retirement income to live on. It doesn't get any more perfect.

I love Annapolis and the Chesapeake. I am starting to wonder if Sept 15 is too late, to start shopping that far north. Do you know when people start pulling their boats up there? (I know your reply was in June; but I am feeling the 'winter is coming' thing now!) After 9/15, it may take us a week or two to tie up loose ends, and relocate, so we are probably looking at an October purchase (end of hurricane season-yay). I don't know if we want to mess with incorporating. I wouldn't mind avoiding the 6% uncapped (or even more) kind of gouge, though. 200k x 6% $12k. I could do some serious upgrades and repairs for $12k. This will be my home, and home sales are not taxed like that! Anyway...

I was wondering how the 'state' knows how long you've been in their waters. Marinas reporting, makes sense. To the extent that you can stay in anchorages, I guess you might be under the radar, unless DNR comes through taking names. But I don't want to be looking over my shoulder for the tax police, either.

Starting out, I think we will hold on to our KS residency, bank, driver's license, etc. We are looking at mail forwarding service in our area to use at the onset. We have to forward our mail somewhere, as we sell. Then, as we get our boat purchased, and establish a starting base, we will move bank, address/mail forwarding, etc. KS allows to you remain a "KS resident", if you have 'some intention' of coming back, eventually.

Yes, painfully aware of the FL 6% use-tax bomb, with a 90 day fuse! FL residency before leaving US, and St. Brendan's Isle mail forwarding are definitely on my radar. A chance that we could find 'the' boat somewhere on the gulf coast, and come around from the other way. But we would probably still go FL->Bahamas-> Then down into the Caribbean. Regardless of where we start from.

Thanks again!
Rich
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Re: Residency/domicile/tax considerations for going transien

by richardreavis » Thu Aug 10, 2017 10:12 am

Forgot to turn on 'notify'. Doing another msg was the only I found to do that. Sorry for the meaningless msg.
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