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, 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, so that 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.