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It's Tax Day—the late, 2020 edition, due to Covid. Nobody's happy. 

But this year, taxpayers who live above a certain income bracket in states like California, New York, New Jersey, and Massachusetts are even less happy than usual.

You probably know why. Most of the country is saw some kind tax cut last year, but the 2017 tax law severely limited the degree to which state and local taxes can be deducted from income for the purpose of computing federal taxes.

So if you make good income and own property in these states, there's a good chance your federal income taxes actually went up, even while many other Americans' taxes went down. 

Now, I know that there's not a lot of sympathy among many Americans for people who make say, $300,000 a year or more, and who are now upset about paying higher taxes. 

Also, roughly half of my highly valued readers live in places like Texas, Florida, and Nevada where state and local taxes are lower to begin with -- so they're not affected by the new law in the same way.

That's why I'm not going to advocate one way or another for what the law should be in this situation. Instead, I'll just share with you one of the more amusing bits of tax law that comes into play as a result.

Because each year, a significant number of wealthy people do in fact move from high-tax states like New York and California to lower-tax places like Florida and Nevada. 

At least, they try to make it appear that they moved, on paper and for legal reasons. But most of the people we're talking about in this situation are wealthy enough to have residences in multiple jurisdictions. 

And state tax authorities in the losing states are understandably less than thrilled with the whole situation, so they'll work hard to try to prove that fleeing wealthy taxpayers haven't really fled. 

That in turn has led to an entire industry of apps and services designed to help people track where they live, how they spend their money, and what they do with their time. But it's not just a matter of time spent.

For example, New York state requires that a fleeing taxpayer has to pass what's become known as “the teddy bear test.”

This is an inquiry -- it sounds like it can be quite intrusive -- into where the taxpayer keeps the items that are most "near and dear" to him or her. So, where do you keep your sentimental items, your pets and valuables -- maybe even, where do your kids go to school?

And yes, for short: where do you keep your teddy bear?

Thanks for reading. A version of this article appeared in my column on Inc.com. If you liked this post, and you’re not yet a subscriber, what are you waiting for? Please sign up for the daily Understandably.com email newsletter, with thousands and thousands and thousands and thousands of 5-star ratings from happy readers. 

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