Many people prepare for a move by cleaning, organizing, packing, arranging movers, and much more. Being prepared and having the right moving professionals to help you are keys to a successful and stress-free move. There is a great deal of consideration and thought that people put into moving their tangible items into a new home. However, there is an entirely separate consideration for those who are keeping their current home but moving into a new place, especially if the home is in a low-tax or no-tax state for income taxes or estate taxes.
In situations where you are becoming a multi-homeowner, it is very important to think about which residence will be your domicile because you can have multiple residences, but you can only have one domicile. Your domicile is the residence that you will call home and it is where you will center your life. Domiciling in a low-tax or no-tax state is a nice benefit of a move but there are some things you should do to ensure you do it successfully. We’re providing 6 tips to get you on your way to becoming a resident of your new state.
Get A New Driver’s License or ID
A good first step to establishing the home in your new state as your domicile is updating your license. Transfer your license or ID to your new state and turn in your other ID. This can usually be done at the DMV and most states will require you to forfeit your old ID when they give you a new one or at least give it some indication that the old ID is now void.
Register Your Car, and Insure it in Your New State
While at the DMV getting your new license, register your car in the new state to keep your records up to date. After it is registered, contact your insurance company and inform them your car is now registered in your new state and should be covered there. In addition to being good steps towards domiciling, these things are required by law in most states.
Settle Into Your New Place
Find new professionals in the area – doctor, lawyer, accountant, financial planner, dentist, etc. Register to vote in your new district and revoke your old voter registration, then go out and vote in the elections. Volunteer and get involved in your new community.
Update Legal Documents and Banking
Update the address on your personal accounts, your national address record, bank and brokerage accounts, health insurance, workplace records and any other important documents. While updating your address with the bank, move your account to your local branch. If they do not have one, establish a relationship with a new bank. Once you have your bank, move your safety deposit box.
Double Check Requirements For Your Old State
This is one of the most important parts of the process. It is not just about taking steps to make your new state home, it’s really about taking steps to revoke your residency from your prior state. A new state is usually happy to have you, it is great for them to have your money coming into the state. However, your old state will not want to see that money go, especially for high earners. You should be extremely thorough and diligent about taking all precautions necessary to leave your old state and minimize the chance of an audit.
Spend Time in Your New State
Make sure you are spending more time in your new state and less time in your prior. Many states will have a threshold to determine statutory residency. This means you could still end up a resident of your old state by just spending too much time there and then you would owe them income taxes. As an example, if you were to keep your home in New York or Connecticut and move into a new home in Florida, you could owe taxes to your old state if you spend more than 183 days there during the year. TaxBird is a great app to help keep track of this. It is simple to set up and is an easy, automatic way to keep counts of your days in each state and monitor your progress towards residency thresholds. You can find out more at taxbird.com.
These tips are a really great start to establishing your domicile in your new state, but this list is not all inclusive. There are many factors that are used when considering residency of a state for income or estate taxes and it requires good standing in all of them to avoid residency in your former state, which is the real goal. It is important to understand all of the factors for your specific states and have a plan in place to mitigate the risks of an audit. Your new accountant and attorney should be able to help make sure you’re covered. Happy savings!
What is TaxBird?
TaxBird is the easiest way to keep track of how many days you spend in each state for state residency tax purposes. Quick, simple setup. Real-time, automated day counts. Detailed end of year reporting. Available now on the App Store. Coming soon to Android. More information at taxbird.com.
Jared Carr is a technology professional with a background in product development and marketing.