Domicile Definition

All you need to know about domiciles and how your primary residence affects your finances.

A domicile is a place you claim as your permanent home, and it affects the laws, benefits and taxes that apply to you.

For some people, their domicile is different from where they're currently living. For example, someone whose domicile is in the U.S. may spend a few months out of the year living in Belize. This means that while in Belize, they get to enjoy both the appealing weather and culture of a Caribbean country while maintaining the rights and benefits of being a U.S. citizen when they return home.

Your domicile determines the country or local government to which you pay taxes, as well as your district when voting in elections. Also, when you register a vehicle, fill out a health insurance application or manage a variety of other legal matters, you use an address within your domicile, and that determines both your responsibilities and rights.

For example, suppose you're single, make $80,000 a year and your domicile is the U.S. You've been holding onto shares of a profitable stock for 10 years as a retail investor. You hear that in Belgium, retail investors don't have to pay capital gains taxes on long-held assets, such as the stock you've had for a decade.

However, if you were to go to Belgium for several months in hopes of avoiding paying capital gains taxes, you'd still end up having to pay the U.S. long-term tax rate, which would be 15% because of your income and marital status. This is because the U.S is your domicile.

The legal meaning of domicile, according to the Legal Information Institute of Cornell Law School, is "someone's true, principal and permanent home. In other words, the place where a person has physically lived, regards as home and intends to return even if currently residing elsewhere."

This means that, for many people, their domicile ends up being the place they were born and lived for the majority of their lives. If, on the other hand, someone were to renounce their citizenship and move to a different country, their domicile would change.

It's important to understand how domiciles work because they have a direct effect on the country to which you pay taxes. For example, if your domicile is the U.S., it doesn't matter where you are physically in the world, the taxes you pay on investment gains have to be sent to the U.S. Internal Revenue Service.


Yes, the U.S. is your domicile because you're a citizen and have legal residence in that country.
No, you can reside in one country while maintaining another as your domicile.
You would still owe taxes to the U.S. because that is your domicile.

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