Increasing Your Return on Life.®

Frank Talk - 1st Quarter Newsletter (2021)

Published: 03/18/2021

Table of Contents


Written by: Frank Fantozzi

Happy Spring, clients and friends!

According to our favorite groundhog, Punxsutawney Phil, it may still be premature to welcome spring, but there’s something about the month of March that brings a sense of hope and renewal, despite often wildly- fluctuating weather conditions. This year, as COVID-19 vaccines are administered in growing numbers throughout the United States, there’s increased hope that we’ll see a gradual, yet steady, return to normalcy in the months ahead. For many, that means an opportunity to gather once again with family and friends in our homes or at our favorite restaurants and watering holes. For others, it may mean a return to in-person learning, or greater freedom to travel for business or leisure. Whatever your definition of normal is, chances are, it’s not anything like what we’ve experienced over the last 12 months.  

As a business, we feel very fortunate that we have been able to provide the same high level of service to our clients over the course of the past year that you have come to expect from your trusted team of wealth advisors at Planned Financial Services. We even added a new service—our complimentary Second Opinion Service, which you can read more about below, as well as additional team members to support the growing need among high-net-worth families and business owners for advice that is timely, relevant and actionable.

Of course, none of that happened simply by chance or luck. Our ability to quickly transition during last year’s lockdown, from a predominantly face-to-face and in-office operational model, to a fully virtual environment, was the result of many years of careful, deliberate and ongoing planning. As our business changed and grew over the course of 25 years, so did our business contingency planning. It’s no different when it comes to your own business and personal financial planning. Successful planning requires diligence, flexibility, and sound leadership and advice from trusted sources, on an ongoing basis. We take great pride in our ability to provide that and more to all of our clients, as you pursue your personally defined Return on Life®.

As we begin to emerge as a nation from this unprecedented time in our history, we are grateful for the trust and confidence you continue to place in us. We look forward to continuing to serve your needs and the wealth and investment planning needs of the friends and associates you continue to refer to our talented and growing team.

Be sure to check out the latest news below about our team, upcoming events, and our perspective on the financial markets and economy.

What’s In It for You?

At-a-glance guide to your 1st Quarter 2021 Frank Talk newsletter:

  • News & Events
    • Team Member News
    • Awards & Recognition
    • Upcoming Events
    • Your 2020-2021 Tax Planning Guide
    • Complimentary Second Opinion Service
    • Visit our Getting Frank Blog
  • Market & Economic Update

News & Events

Team Member News

Frank Fantozzi is Recognized as a Top Wealth Advisor for the Fourth Consecutive YearFrankProf5Headshot
We’re pleased to announce that for the fourth consecutive year, Planned Financial Services President and Founder, Frank Fantozzi, CPA, MST, PFS, CDFA, AIF®, was recognized among Ohio’s Best-In-State Wealth Advisors in the annual list published by Forbes.

The Forbes Best-In-State Wealth Advisor ranking, developed by SHOOK Research, is based on in-person and telephone due diligence meetings and a ranking algorithm that includes: client retention, industry experience, review of compliance records, firm nominations; and quantitative criteria, including: assets under management and revenue generated for their firms. Portfolio performance is not a criterion due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK Research receives a fee in exchange for rankings.

Frank Fantozzi Asked to Serve on Board of Trustees of Cleveland Clinic Member Hospital
In February 2021, Frank Fantozzi, CPA, MST, PFS, CDFA, AIF® was elected by the Board of Directors of the Cleveland Clinic Regional Hospitals to serve as a member of the Board of Trustees of Marymount Hospital, Inc., which owns and operates Marymount Hospital. Marymount Hospital is a full-service general hospital within the Cleveland Clinic enterprise. Marymount Hospital is a Catholic hospital, affiliated with the Sisters of St. Joseph, Third Order of St. Francis  and helps ensure conformity with the Ethical and Religious Directives for Catholic Health Care Services. The Board of Trustees serves in an advisory role to the Board of Directors and the Hospital President.

Andrew Hardy - Headshot1

Andrew Hardy Joins Planned Financial Services Team as Account Executive
Join us in welcoming Account Executive, Andrew Hardy, to the Planned Financial Services team. Andrew  will play an integral role in supporting the team’s wealth advisors and client liaisons in providing relevant, timely and objective financial and investment advice to high-net-worth families and business owners. Andrew began his career as a financial systems analyst in 2017. He later founded a financial technology start-up before joining a Cleveland-based software solutions provider, as a business consultant and sales operations specialist. After graduating from West Virginia University, where he received his Bachelor of Science in Finance with a focus in investments and business valuation in 2016, Andrew obtained a certificate in Data Analytics from Case Western Reserve University in 2019. He recently received his FINRA Series 7 registration and is studying for his Series 66 registration.

Awards & Recognition


PFS is Featured in Crain’s Cleveland Business 2021 Book of Lists
Planned Financial Services is listed among the largest “Investment Advisers” in Cleveland in Crain’s Cleveland Business 2021 Book of Lists.

The Book of Lists is a one-stop resource containing exclusive data and contacts for companies and organizations in Northeast Ohio.


Upcoming Events

What’s the Secret to Keeping Clients for Life? Join us on March 25th to Find Out!
You and your guests are invited to attend an exclusive Zoom Event hosted by PFS, featuring internationally recognized sales expert and best-selling author, Hal Becker. The event will take place on March 25, 2021 at 11:00 am - 12:00 pm ET.

Hal will share strategies today’s business owners and leaders can employ to retain clients for life, including:

  • The 3 rules of incredible customer service
  • What is a ‘creative opportunity’ and why do you want it?
  • The mistakes most companies make
  • Why you lose customers and how to get them back

Don’t miss the chance to get your questions answered during the live Q&A session following Hal’s remarks, at 11:45 am.

To register, email to receive your Zoom conference invitation.

Watch for News About Our 13th Annual Economic Summit

We are looking forward to the possibility of hosting our 13th Annual Cleveland Economic Summit as an in-person event this fall. As you may recall, last year’s event was held virtually due to COVID-19 restrictions. While it’s too early to commit to hosting in-person at this time, we will continue to monitor all appropriate local, state, and federal guidance and recommendations, and provide more information about the event, speakers and venue in the coming months, including a “Save the Date” reminder.

It’s Not Too Late to Get Your 2020-2021 PFS Tax Planning Guide! 2020-2021 Tax Planning Guide

Whether you’re still working on your 2020 returns, or have already submitted them, having a plan in place to manage your tax exposure is an integral part of financial planning and can be especially important during times of change or uncertainty. To help gain the clarity you seek throughout the year, use the link below to access your Planned Financial Services 2020 – 2021 Tax Planning Guide.

View or download your PFS 2020 - 2021 Tax Planning Guide now.


Reminder…Our Complimentary Second Opinion Service is Available to Your Family, Friends and Colleagues

Last year, we introduced a new service that has been very well-received among the friends, family members and colleagues of many of our clients and associates. Our complimentary Second Opinion Service provides the people you care about with an opportunity to benefit from the same expertise and guidance that you have come to expect as a valued client of Planned Financial Services.  

In many cases, a second opinion will simply provide confirmation, and the confidence that those you care about are on track to fulfill their values and achieve their goals with their current financial provider or strategy. However, if needed, we are happy to suggest ways in which we can help, including recommending another provider if we are not a good fit for their needs. Either way, following a Discovery Meeting and Investment Plan Meeting with our experienced team, they will receive a Total Client Profile and a Personalized Financial Assessment of their current situation. To learn more about the Planned Financial Services Second Opinion Service, click here to access or download a full description of this service and the benefits it offers to the people you care about most.

Looking for Additional Insights on Personal and Business Planning? Visit our Getting Frank Blog

For timely information on the financial planning, business growth and investment topics that are meaningful to you, visit our Getting Frank Blog at Plan to visit us weekly as we post new articles and opinions.

Market & Economic Update

*The 10-year Treasury yield continues to climb higher, but remains low by historical standards. Still, the size of the move since July 2020—and the more recent acceleration—has some market participants worried about the potential impact on stock markets if rates continue to rise. Historically, the S&P 500 Index has endured extended periods of rising rates well. If an improving growth outlook is part of what’s driving rates higher, it should also support corporate profits, creating a positive fundamental backdrop for stocks.

Rising Rates are Usually Bullish For Stocks
Bond yields have been on the move lately, but stock prices have also been rising. And while some market participants are expressing increased concern that rising bond yields may begin to weigh on stock returns, stocks have usually been resilient in rising rate environments.

We looked at major extended periods of rising rates dating back to the early 1960s. We found 13 periods in which the 10-year Treasury yield rose by at least 1.5%, a move the current increase hasn’t even reached yet. These rising-rate periods lasted between six months and almost five years, with the average a little over two years. In nearly 80% (10 of 13) of the prior periods, the S&P 500 Index posted gains as rates rose, as it has so far in the current rising-rate period. In fact, the average yearly gain for the index during the previous rising-rate periods, at 6.4%, is just a little lower than the historical average over the entire period of 7.1%, while rising rates have been particularly bullish for stocks since the mid-1990s. Not all rising-rate periods are the same, though, and we believe stocks may tolerate the current rising-rate period well.

Inflation Makes a Difference
How markets have performed during a rising-rate period has depended heavily on what’s going on in the economy, with inflation a leading consideration. Rising rates during periods of high inflation have generally resulted in lower stock returns, although the level at which inflation has become a headwind is well above what even most inflation hawks expect now.

From 1968 to 1990, the Consumer Price Index (CPI) rose an average of 6.2% per year and was above 3.5% every year except three. Five of the rising rate periods took place at least partially during those inflationary years. The average annual return during those rising-rate periods was -0.4%. During all other rising-rate periods, the average annual return was 13.0%, well above the average for all returns since 1962. While inflation expectations are rising right now, CPI growth of even 2.5% at the end of the year would be an upside surprise based on the median estimate of Bloomberg-surveyed economists. For all the concerns about inflation, we are a long way from the ‘70s and ‘80s.

A Steepening Yield Curve Has Been a Good Sign
The yield curve is the difference between long-term and short-term interest rates. A steepening yield curve usually tells us two things: economic growth expectations are picking up, pushing long-term rates higher; and the Federal Reserve (Fed) probably is not yet pumping the brakes, helping to keep short-term rates relatively low, which usually also means inflation is under control.

During the four rising-rate periods that saw the least yield curve steepening, as measured by the difference between 10-year and 3-month Treasury yields, S&P 500 Index returns were weaker than for a typical period, averaging an annualized 3.5%. In the four periods when the yield curve steepened the most, the S&P 500 averaged an annualized 14.5%.

While yield curve steepening has not yet been dramatic enough to make its way into the top four periods historically, we have seen considerable steepening already. With the Fed likely on hold for some time, anchoring the short end of the curve, we expect that if rates continue to rise, it will come with further steepening. Some of that may be because of rising inflation expectations, but the main driver is likely to be an improved growth outlook.

The Starting Point Matters
Rates have been rising but they are still historically low, with the 10-year Treasury yield at the end of February falling into the bottom 2% of all values dating back to 1962. While it’s true that rates become a bigger burden for business, consumers, and governments as they rise, even at current and higher levels rates are still attractive and can continue to support a robust economic rebound.

Looking back again at the different rising rate periods, during the four periods with the highest initial 10-year Treasury yield, the S&P 500 averaged a 2.5% annualized return, while those with the four lowest initial yields averaged 15.4%. A lower initial yield likely reflects manageable inflation and a Fed that isn’t tightening, but it also represents the added economic support of a still low cost of borrowing even as rates rise. 

The Current Rising Rate Environment Looks Positive For Stocks
Rising interest rates have clearly been one of the reasons the S&P 500 has consolidated since hitting its last all-time high on February 12, but it’s important to look at the bigger picture. Rising rates in general have not prevented stocks from advancing and the current environment improves the odds that stocks will be able to continue to press higher. Rising rates are being driven in part by an improving growth outlook; inflation, while normalizing, is still well below levels that have historically disrupted markets; the Fed remains supportive; and borrowing costs are still historically quite low. Every market environment is unique, but taking our cues from history, the economic fundamentals continue to look strong and the current rising rate picture looks most similar to those periods of above-average stock performance.

Closing Remarks

As conditions evolve in the weeks and months ahead, you can rely on your PFS team to continue to monitor and adjust our portfolios and keep you up to date on these and other developments. We also want to remind you that our office is open for clients who would like to meet in person. For those who prefer to meet virtually, we continue to use Zoom for virtual meetings, and are always available via phone. Just let us know how you prefer to meet, and we’ll make it happen!

We are always honored to help our clients’ friends and business associates take greater control of their future with guidance from the PFS team. We welcome and are grateful for the many introductions our clients continue to provide. If you, or someone you know, has questions or concerns about your personal investment strategy or business finances, please don’t hesitate to share information about our complimentary Second Opinion Service and reach out to your experienced team of wealth advisors at 440.740.0130.

Don’t forget to join or follow PFS on Twitter, LinkedIn, Facebook and YouTube.

Real People. Real Answers. 

Health, Happiness, and Good Fortune,

Frank Fantozzi
President & Founder


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

S&P Energy Index: A market capitalization weighted index that tracks the performance of energy companies.

*Some research was provided by LPL Financial, LLC, March 2021.  PFS nor LPL make no representation as to its completeness or accuracy.

Planned Financial Services, LPL Financial, Forbes, SHOOK Research, The Cleveland Clinic, Marymount Hospital, Inc., Crain’s Cleveland and Hal Becker are all separate, unaffiliated entities.

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

Securities offered through LPL Financial, Member FINRA/SIPC; a separate entity from Planned Financial Services.

Stress Testing: Does Your Portfolio Pass the "What If" Test?

Written by: Cynthia Yang

Many banks conduct regular “stress” tests to predict the impact of adverse external events on their earnings, capital and loan portfolios. Banks use the results to shore up any revealed weaknesses. Investors should periodically perform the same kind of stress test on their investment portfolios.

Accentuate the negative

Stress testing is the ultimate “what if” analysis. It uses modeling techniques to predict the impact of an economic downturn, financial crisis or any number of other “worst case” scenarios on your wealth. By analyzing this information, you can identify vulnerabilities in your financial plan and make changes to enhance its probability of success.

There’s virtually no limit to the scenarios you can test. Examples include:

  • Extreme market volatility,
  • A severe or prolonged bear market,
  • Rising inflation or interest rates,
  • An oil price crash, or
  • A financial crisis such as the “tech bubble” bust that started in 1999 or the subprime mortgage crisis of 2007-10.

A useful exercise is to take the contents of your actual portfolio and calculate the outcome had you owned the identical investments on the eve of a historical financial crisis. Such testing can reveal potential weaknesses in your portfolio and help you pinpoint strategies to mitigate them.

For example, you might change the assumptions in your scenario analysis to see how your portfolio would respond if it were more heavily allocated to bonds rather than equities, or if it were more diversified by region, sector or other factors. While there are no guarantees, this type of stress testing can help you identify asset allocations that increase your probability of weathering various storms and ultimately meeting your financial goals.

Don’t eliminate the positive

Stress testing tends to focus on negative scenarios, but don’t ignore the positive. Incorporating positive market developments in your scenario analysis — such as the resurgence of a struggling sector or improved stability in a volatile market — can help you ensure that you’re invested in the right vehicles to maximize upside potential.

Of course, stress testing can tell investors only so much. During the recent pandemic, many stocks soared despite economic conditions that would suggest they’d be under greater downward pressure. So talk to your advisor about the potential benefits — and limitations — of stress testing. Your advisor can help you develop a resilient financial plan that’s customized to your specific circumstances and goals.

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.
Securities offered through LPL Financial, Member
FINRA/SIPC; a separate entity from Planned Financial Services

To Make Your Savings Last, Consider Phased Retirement

Written by: Brian Klecan

Many people approaching retirement age are justifiably concerned about how long their savings will last. One strategy that can help extend the life of your savings, while easing some of the emotional strain associated with leaving the workforce, is phased retirement. This is a gradual shift from full-time work to part-time or freelance work — and ultimately to full retirement.

Phased retirement allows you to enjoy additional leisure time while gaining significant financial benefits. But it’s important to plan carefully to make the most of those benefits and avoid potential pitfalls, such as losing health insurance coverage or retirement plan matching funds.

Financial advantages

Working longer via phased retirement may offer the following financial benefits:

Continued retirement plan contributions. Delaying retirement allows you to continue building tax-deferred savings in IRAs and employer-sponsored retirement plans, such as 401(k)s, provided you continue to be eligible. The SECURE Act, passed in late 2019, eliminated the age limit for contributions to traditional IRAs (for 2020 and later). So, if you’ve earned income from a job or from self-employment and otherwise qualify, you can continue making pre-tax contributions to an IRA, even if you’re over 70½.

Deferral of RMDs. You’re generally required to begin taking required minimum distributions (RMDs) from traditional IRAs and 401(k)s by April 1 of the year following the year you turn 72 (70 ½ if you reached 70 ½ before January 1, 2020). However, you can defer RMDs from your current employer’s 401(k) plan and allow the funds to continue growing until you retire if:

  • You continue working past age 72,
  • Your plan permits such deferral, and
  • You don’t own 5% or more of the company.

This benefit isn’t available for non-Roth IRAs or for a former employer’s 401(k) plan. But it may be possible to defer RMDs by rolling those funds into your current employer’s plan.

Enhanced Social Security benefits. If the income from your job and other sources is sufficient to cover your living expenses, you might want to delay Social Security benefits to age 70. This allows those benefits to grow by around 8% per year, maximizing your monthly payments once you start receiving them.

Working longer also gives you more time to pay down mortgages and other debts while preserving your retirement savings and taking advantage of employer-provided health care and other employee benefits as long as possible.

Steps to stepping down

If you’re contemplating phased retirement, take a personal inventory by gathering information about your assets, liabilities, and income sources (now and in the future). Are they sufficient to last through your expected retirement years? If you cut back your work hours, will you be able to cover your living expenses without tapping your retirement savings or Social Security? If not, one option to consider is ceasing contributions to IRAs and employer retirement plans. But if that means giving up matching contributions, don’t miss a valuable opportunity to grow your retirement savings.

Also learn about your employer’s policies. Is phased retirement even an option? Some employers have formal phased retirement programs, while others are willing to negotiate these arrangements on a case-by-case basis.

But despite the benefits to the employer — including retention of experienced workers, mentoring of younger employees and preservation of institutional knowledge — phased retirement hasn’t received wide attention. If your employer doesn’t offer phased retirement (and you can live without the benefits), you might explore other options, such as a part-time job with another employer or freelance or contract work.

Finally, assess the impact of going part time. How might reducing your hours affect your eligibility for retirement plans and other benefits? For example, it may reduce pension benefits that are based on your most recent earnings. And many employers limit certain benefits — such as health insurance, 401(k) plans and matching employer contributions — to employees who work a minimum number of hours. Of course, losing health coverage is less of an issue if you’re eligible for Medicare or if you’re covered under your spouse’s plan.

Going through a phase

Phased retirement can help your retirement dollars go further by increasing the size of your nest egg and delaying the time you need to start using it. Your financial advisors can help you assess your unique situation, determine the financial impact of reducing work hours and help you position yourself for a comfortable retirement

Sidebar: Should you enroll in Medicare?

Some Americans aged 65 and older who continue to work and have work-based health insurance aren’t sure about whether they need to enroll in Medicare. Medicare rules are complex, but here’s a basic overview.

Once you reach age 65, you’re eligible for Medicare and you may have a limited amount of time to enroll to avoid costly penalties. If your employer has fewer than 20 employees, you generally must enroll in Medicare Parts A and B as your primary insurance — and pay premiums on Part B coverage. However, if your employer has 20 or more employees, you can delay Medicare until you leave your job or lose your employer coverage. Most people in this situation enroll immediately in Part A, which typically is free and can help reduce certain health expenses.

Unless your employer’s plan is fully subsidized, crunch the numbers. Calculating expenses can help you determine whether you’re better off paying for group coverage or switching to Medicare as your primary insurance.

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.
Securities offered though LPL Financial, Member
FINRA/SIPC; a separate entity from Planned Financial Services.

Repayment Plans Can Ease the Pain of Student Loan Debt

Written by: Amy Valentine

The Federal Reserve says that student loan debt in the United States totals more than $1.67 trillion. While young adults carry most of it, Americans of all ages are repaying these loans — roughly one-third of those between 18 and 29, 22% between 30 and 44 and 7% between 45 and 59, according to Pew Research.

The CARES Act suspended principal and interest payments on federally-held student loans through September 30, 2020 — later extended through September 30, 2021. Yet many debtors are finding it difficult to resume monthly payments. If you or a family member is struggling to keep up with payments, explore the various repayment solutions.

Federal government options

The federal government offers a variety of student loan repayment options. The terms of these repayment plans depend on several factors. These include:

  • The type of loan,
  • Whether the loan was for undergraduate or graduate education, and
  • The loan’s origination date.

For most federal student loans, the Standard Repayment Plan calls for fixed payments over 10 years (10 to 30 years for consolidation loans). Graduated payments (starting low and increasing over the repayment period) and extended payment terms may be available. Keep in mind that graduated or extended payments increase the total amount borrowers pay over time.

Reducing monthly payments

There are also programs to help reduce monthly payments. Income-driven plans generally are the most favorable — for example, the federal government’s Revised Pay As You Earn (REPAYE) plan. Under a REPAYE plan, an eligible debtor’s monthly payment is generally 10% of his or her discretionary monthly income. Discretionary income is the amount by which actual annual income exceeds 150% of the poverty guideline for the debtor’s state and family size. Generally, the repayment period is 20 years (25 years for graduate education) after which any outstanding loan amount is forgiven.

One disadvantage of a REPAYE plan is that if the debtor’s income increases substantially during the repayment period, monthly payments may grow higher than the payments that would have been made under the Standard Repayment Plan. A Pay As You Earn (PAYE) plan solves this problem by capping monthly payments at the Standard Repayment Plan amount. PAYE plans are similar to REPAYE plans, but they’re available only to “new borrowers” as of October 1, 2007, (that is, borrowers with no loans disbursed before that date). Also, PAYE-eligible borrowers must have at least one eligible federal student loan disbursed after October 1, 2011, and may need to meet other requirements.

Best plan for you

Other income-driven options to consider include Income-Based Repayment Plans and Income-Contingent Repayment Plans. And don’t overlook student loan relief for graduates who take certain public service jobs or volunteer for organizations such as the Peace Corps, AmeriCorps or the military.

Not all of these options are accessible to or appropriate for every borrower. The PFS team can help you determine which ones are available and structure a repayment plan that makes sense for you or your loved one’s financial situation.

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.
Securities offered though LPL Financial, Member
FINRA/SIPC; a separate entity from Planned Financial Services.

How to Keep States From Taxing You Twice

Written by: Frank Fantozzi

It’s no secret that many states are strapped for cash these days. Naturally, they want to collect as much income tax as they legally can. And, in fact, neither the Constitution nor federal law explicitly prohibit multiple states from attempting to collect tax on the same income. So if you live and work in more than one state and want to prevent double taxation, you may need to take action.

Home sweet homes

One issue is the distinction between domicile and residence. Generally, if you’re domiciled in a state, you’re subject to that state’s income tax on your worldwide income. Your domicile isn’t necessarily where you spend most of your time. Rather, it’s the location of your fixed, permanent home or the place to which you intend to return when you travel elsewhere. Your domicile doesn’t change — even if you spend little or no time there — until you establish domicile elsewhere.

Residence, on the other hand, is based on the amount of time you spend in a state. You’re a resident if you have a permanent place of abode in a state and spend a minimum amount of time there (for example, at least 183 days per year). Many states impose their income taxes on residents’ worldwide income even if they’re domiciled in another state.

Source of trouble

Let’s look at an example (for informational purposes only). Suppose you live in State A and work in State B. Given the length of your commute, you keep an apartment in State B near your office and return to your home in State A only on weekends. State A taxes you as a domiciliary, while State B taxes you as a resident. Neither state offers a credit for taxes paid to another state (although some states do provide credits), so your income is taxed twice.

One possible solution to such double taxation is to avoid maintaining a permanent place of abode in State B. However, State B may still have the power to tax your income from the job in State B because it’s derived from a source within the state. Yet State B wouldn’t be able to tax your income from other sources, such as investments in another state.

Abandoning a domicile

As previously suggested, domicile is a state of mind. It’s the place you intend to return, regardless of how much time you spend elsewhere. Suppose you’re moving from State C to State D. You buy a house in State D, but because of your continued ties to State C you decide to keep an apartment there.

State C’s revenue department determines that your domicile hasn’t changed. Meanwhile, State D’s revenue department taxes you as a domiciliary. Both states impose their income taxes on all of your income, and while each state offers credits for taxes paid to other states, they’re not available in this situation. Why not? Under the law of each state, credits are available only with respect to taxes that are properly due to another state. But because each state claims you as a domiciliary, neither believes that taxes are properly due to the other.

To avoid double taxation in this situation, you need to demonstrate your intent to abandon your domicile in one state and establish it in the other. For example, you might obtain a driver’s license and register your car in the new state, as well as open bank accounts and register to vote there. Also consider using your new address for important documents, such as insurance policies, tax returns, passports and wills. And, to truly be “at home,” subscribe to local publications, attend a nearby place of worship, join a neighborhood gym and find a primary care doctor in your new community.

State laws vary

The law regarding domicile varies from state to state. So, to ensure you’re doing everything possible to minimize unnecessary taxes, work with a tax professional familiar with multi-state residency and the tax rules that apply in your situation.


Investment advice offered through Planned Financial Services, a Registered Investment Advisor.
Securities offered through LPL Financial, Member
FINRA/SIPC; a separate entity from Planned Financial Services.
This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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