Introduction
Understanding how days are counted for residency purposes is crucial for tax planning and compliance, especially in jurisdictions that have specific rules regarding residency status and either impose significant taxes on residents (New York, California, etc...) or offer significant benefits for residents (Puerto Rico). This article outlines the general principles of day counting for residency tests. We can't cover all the jurisdictions in the world, but we can outline some of the most common rules and discuss specific rules in select jurisdictions.
General Principles of Day Counting
In most jurisdictions, a "day" is typically defined as any part of a 24-hour period during which an individual is physically present in that jurisdiction. However, the specific rules can vary significantly depending on the jurisdiction. For example, for United Kingdom ("UK") residency tax purposes, a day generally counts if an individual is present in the UK at midnight at the end of that day. New Mexico and Maryland, however, require a full 24-hour day of presence to count as a day towards its statutory residency threshold. In some cases, presence by either spouse can count as a day in a jurisdiction for statutory residence purposes.
What counts as a day in Puerto Rico?
Establishing residency in Puerto Rico can be important because it offers individuals an exemption from U.S. and Puerto Rico tax on capital gains accrued after establishing Puerto Rico residency and a tax exemption on interest and dividends from Puerto Rico sources. Eligibility for the exemption requires spending at least 183 days in Puerto Rico during the tax year and meeting other requirements.
For Puerto Rico tax residency, a "day" is generally counted as any portion of a day during which you are physically present in Puerto Rico. Stated another way, you are considered present in Puerto Rico for a full day even if you are only there for a brief time on that day. Other special rules apply:
- if you are physically present in both the United States and Puerto Rico during a single day, that entire day counts as a day of presence in Puerto Rico.
- Up to 30 days spent outside of both the United States and Puerto Rico for business or personal travel can count toward your 183 days in Puerto Rico, provided you meet other conditions, such as spending more days in Puerto Rico than in the U.S.
- Certain days spent in the U.S. do not count as days of presence in the U.S. for the purposes of the presence test, including: (a) days you are in the U.S. for less than 24 hours while in transit between two places outside the U.S. and (b) days spent outside Puerto Rico for qualifying medical treatment or due to a major disaster/mandatory evacuation may also be counted as days of presence in Puerto Rico.
Counting Days in New York
For New York State, New York City and Yonkers residency purposes, any part of a day spent in New York counts as a day. You do not need to be present at your permanent place of abode for the day to count as a day in New York. N.Y. Comp. Codes R. & Regs. Tit. 20 § 105.20. For example, if you arrive in New York State on January 1 at 11:00 PM and leave on January 2 at 1:00 AM, you have spent two days in New York State even though you were only there for two hours. Specifcally, New York Tax Regulations state: "In counting the number of days spent within and without New York State, presence within New York State for any part of a calendar day constitutes a day spent within New York State, except that such presence within New York State may be disregarded if such presence is solely for the purpose of boarding a plane, ship, train or bus for travel to a destination outside New York State, or while traveling through New York State to a destination outside New York State. For example, if a Connecticut resident travels to JFK airport to board a plane to Europe, the day is not counted toward presence in New York State. See NY Nonresident Audit Guidelines.
In deciding what level of extraneous activity makes presence in New York not incidental to the travel, the relevant criteria are (1) whether the traveler's activity is incidental to his presence for travel purposes and (2) the degree of control the taxpayer exercises over his travel arrangements. For example, someone who arrives a day early for a cruise, in order to attend a business meeting, would be present for that day, whereas time spent by someone who visits a friend during an unavoidable delay or stopover would not count as a day present in New York. Quite often, activity incidental to travel takes place on route to, or at a transportation terminal. Such activity as the purchase of meals or other items at a terminal, access to an automatic teller machine (ATM), stopping for gas or a meal while driving through New York, stopping to pick up a traveling companion on route to the terminal, parking the car in New York in order to meet a limousine or other conveyance that takes the individual to the airport or terminal should not change the treatment of this day as a travel day for the purpose of the 183-day count. See NY Nonresident Audit Guidelines.
What Counts as a Day in the UK
The fundamental rule is that if you are physically present in the UK at midnight, that day is counted as a day of presence for the UK Statutory Residence Test ("SRT").
However, a day spent in the UK solely for transit may not count, provided you arrive as a passenger, leave the next day, and your activities in the UK are not to a "substantial extent unrelated" to your passage (e.g., having a meal is fine, but meeting friends or attending a business meeting is not).
Burden of Proof and Record Keeping Requirements
In general, for tax purposes, the burden of proof is on the taxpayer to prove their tax compliance, and when it comes to residency determination, taxpayers must establish their location on each day during the year. See In the Matter of the Petition of Boniface, New York Tax Appeals DTA No. 829018 (April 29, 2021) (Taxpayers deemed New York residents despite being in the state for fewer than 184 days because they failed to provide credible evidence to prove they spent the majority of the year elsewhere. The tribunal found their documentation, which included unsworn statements and calendars with discrepancies, insufficient to meet the burden of proof required to establish a new domicile outside of New York. Tax auditors subpoenaed Verizon phone records.). Use the Domicile365 App to record a detailed day-by-day log of your location that is essential to substantiate your residency status. The Domicile365 App makes it easy to track your days for tax residency purposes.
Conclusion
The rules for what counts as a "day" for tax residency are complex and vary significantly across jurisdictions, from New York's "any part of the day" rule to the UK's "midnight" test. As the burden of proof for non-residency status falls squarely on the taxpayer, maintaining meticulous, credible records is not just advisable—it's essential for withstanding audits.
The Domicile365 App is designed to solve this challenge, providing a detailed, day-by-day log of your location to substantiate your residency claims. Whether you're navigating the specific transit exceptions in New York, the unique presence tests for Puerto Rico, or residency rules anywhere else, our app provides the clarity and documentation you need.
Take control of your tax planning and ensure compliance by downloading the Domicile365 App today for Apple iOS or Google Android.
