Establishing Residency in a New State

by | Nov 19, 2019 | Retirement, Taxes

Stylized American map on a starburst, striped background.

America is unique in the way it has so many different systems of government (states plus federal). This can make relocating to another state a confusing process.  It may be one which many people simply never complete in terms of paperwork. Doing that is actually a big disservice to yourself — and potentially your bottom line — when you consider the dire tax consequences you could be facing in two states as a result.  

Here are some of the steps to establishing residency that I think are important: 

  • To establish a domicile, you need to find a place to live with a permanent address that is not a post office box. In some states like Florida, you have to fill out a declaration of domicile. 
  • Change your mailing address to your new state and get your mail forwarded there. 
  • Don’t draw a salary or other income from the former state because that will imply that you work there. 
  • Change your address with the IRS. 
  • Register your car and get a new driver’s license. 
  • Register to vote and terminate your former registration. 
  • Obtain a library card in the new place.
  • Get new doctors.

If You’re Moving for Tax Purposes or a Homestead Exemption

In a perfect world run by bookkeepers, your move-in day would be January 1 and you’d be unemployed when you moved in. Let’s say you have a different situation. The states and the feds all share the same definition of how much time you need to spend in a state in order to be a resident: 183 days.

They. Will. Audit. You. I recommend developing a system to retain all of your receipts.  Make this happen so it comes as naturally as swerving for your life on I-90 or the Dale Mabry. People interested in Florida’s generous homestead exemption should be aware that they audit even more because the counties enter the equation — and there’s money to be had.

Switching states is a hot topic now because the president has announced his intentions to make Florida his domicile. That is not yet a fait accompli and I suspect there will be much legal wrangling over the fact that most of his income comes from New York.  But know YOU know what is recommended if YOU will be establishing residency in a new state.