It is usually the mountain vistas, the pristine rivers and lakes, the outdoor recreation and the abundant wildlife that attract second homeowners to Jackson Hole, WY – not the tax benefits. But if you want to protect your family’s wealth and find a better quality of life, there’s a lot more to consider.
Wyoming is the second most tax-friendly state behind Alaska, according to a 2016 Kiplinger Report. With a local sales tax of 5.6% on average, Wyoming has the 9th lowest property taxes in the nation and very favorable trust laws.
As one of a handful of states with no state income tax, the tax-free zone encompasses trust income, capital gains, individual as well as corporate income, and estate and gift tax, according to Chris Reimer a partner at Long Reimer Winegar Beppler LLP in Jackson Hole, Wyo.
Reimer says there are many ways to take advantage of tax laws that are greatly overlooked. First and foremost, he suggests homeowners consider a trust to acquire a house because certain Wyoming trusts can protect homeowners from estate taxes for generations.
“The light bulb I’ve seen over and over again is when I suggest setting up a dynasty trust here,” he says. “Even when they know the next generation is not going to live here, they can use Wyoming trusts to minimize the transfer taxes on wealth.”
Most of Reimer’s clients are in their 50s and 60s, looking to create a new lifestyle for future generations. “They are planning to retire soon, but they don’t want to be in traffic. They want to be out in the woods. Jackson has that unique charm and old west flavor.” The tax benefits are just a bonus.
However, they need to be navigated carefully because if a homeowner is moving from a state that has income taxes they fall into one of two camps, he says. Eastern states tend to count the days you live there in order to claim another state as your primary residence. While western states tend to look at facts and circumstances like where do you spend holidays, where do your doctors and financial planners live and where do your children go to school.
Either way, “It’s not about being a resident of Wyoming, it’s about not being a resident of another state,” Reimer says, adding that many states that collect taxes from affluent people audit them to see where they are spending their time.
Most people don’t know that you don’t have to live in Wyoming six months and a day in order to be a full time Wyoming resident. In fact, Wyoming doesn’t measure how many days you spend in the state to be a resident, Reimer says.
After you acquire a residence, you can obtain a driver’s license, and thereafter, register to vote. Reimer calls it the “trifecta,” and laughs when he explains: “It’s harder to get a fishing license than a driver’s license in Wyoming.”
Many second homeowners boost their Wyoming profile by joining a board of one of the many nonprofit organizations or give charitable contributions. See the list of actions to take to become a Wyoming resident below.
After learning more about the tax benefits, it’s no surprise that Teton County often rates among the wealthiest zip codes in America. According to the Associated Press, it has a well- deserved reputation among the business-savvy and is consistently rated in the top tier of fiscally sound state governments, boasting a AAA rating from Standard & Poor’s.
To compare Wyoming to other states with no state income taxes, like Alaska, Nevada, South Dakota, Washington, Texas and Florida, is to see that Wyoming has the market cornered, Reimer says. “In this realm of the Rocky Mountain West, Jackson Hole doesn’t really have a competitor.”
Wyoming Tax Benefits
- No personal income tax.
- No tax on corporate income.
- No inheritance tax.
- No estate tax.
- No real estate transfer tax.
- Low property taxes.
- No gift tax, so real estate can be gifted to heirs without paying a gift tax.
- No intangible tax on financial assets like stocks and bonds.
- No tax on Social Security, private pension, and individual wage income.
- Dynasty Trusts shield real estate from federal estate taxes for up to 1,000 years.
Actions that help change your residence:
- Purchase or rent home
- Send and receive mail
- Conduct estate planning, including locating the “family office” in state
- Obtain services from a local accountant, lawyer, barber, dentist, M.D.
- Serve on the board of a Wyoming corporation or local charity
- Make distributions to local charities, including the University of Wyoming
- Obtain primary cell phone provider
- Hold professional licenses and memberships
- Prepare and send federal income tax returns
- Relocate financial accounts
- Receive primary income
- Register and Vote
Money Magazine, July 21, 2014,”The 10 Richest Counties in America” http://time.com/money/3014512/richest-wealthiest-highest-income-counties-america-united-states/