Overview

Moving between states mid‑year can change which state has the right to tax portions of your income. States use different residency tests (domicile, statutory days‑present, or a combination) and source rules to decide what income is taxable. In my 15+ years advising clients, I’ve seen taxpayers underestimate the paperwork and face unexpected state tax bills when they didn’t document their change of residence.

How residency changes typically work

  • Part‑year residency: If you establish residency in a new state partway through the year, most states require a part‑year resident return. That return taxes the income you earned while a resident of that state.
  • Nonresident sourcing: The previous state may tax income sourced to it (wages earned there, rental income, business income) even after you leave.
  • Credits and double taxation: Many states offer a credit for taxes paid to another state to prevent double taxation, but the rules and calculation methods differ by state. See our guide on multistate filing basics for examples and allocation rules: Multistate Filing Basics: Residency, Sourcing Income, and Credits.

Documentation that matters

To support a residency change you’ll want contemporaneous records that show intent and where you lived, such as:

  • Lease or purchase agreement and settlement statements
  • Driver’s license or state ID issuance date and voter registration
  • Utility bills, insurance records, and school enrollment dates
  • Employer paperwork showing transfer dates, payroll location, and withholdings
  • Travel logs or calendar showing days spent in each state

States often use a mix of objective documents and behavioral evidence (where you vote, which state issues your driver’s license, where your family lives) when auditing residency claims. For specifics on how states determine residency for part‑year and remote workers, see: How State Residency Is Determined for Part‑Year and Remote Workers.

Common filing scenarios (examples from practice)

  • Job relocation: A client moved from Illinois to Texas in July. Illinois required a part‑year return covering income earned while the client was an Illinois resident; Texas had no individual income tax. We documented the move date, updated voter registration and driver’s license promptly, and adjusted withholdings to avoid underpayment.
  • Remote work split across states: A remote worker split time between a high‑tax state and a no‑tax state. We allocated wages based on days worked in each state and claimed credits where allowed.

Key strategies to reduce risk

  1. Plan the timing when possible — moving late in the year can simplify residency for the following tax year.
  2. Update core records promptly (driver’s license, voter registration, bank address, and tax withholdings).
  3. Keep a detailed day‑by‑day log for the year you move — many states use day counts for statutory residency tests.
  4. Ask your employer to update payroll and withholding to reflect the new state when you relocate.
  5. Consult a tax professional before filing multistate returns; credits, apportionment, and sourcing rules vary and can be complex.

Common mistakes to avoid

  • Assuming changing mailing address is enough. State tax residency depends on broader facts about your life and intent.
  • Forgetting to file a part‑year return in the state you left — that can trigger notices or penalties.
  • Not claiming available credits or improperly allocating income, which can lead to over‑payment or audits.

Practical checklist for a mid‑year move

  • Record your official move date and keep supporting documents.
  • Update driver’s license, voter registration, vehicle registration, and professional licenses.
  • Notify employers and update payroll withholding.
  • Track days in each state and gather income records (W‑2s, 1099s).
  • Check both states’ filing rules and deadlines; file part‑year or nonresident returns as required.
  • If you paid tax in the old state after moving, review whether you qualify for a credit in the new state.

Where to look for authoritative guidance

FAQs (brief)

Q: Do I owe tax in both states?
A: Possibly — you may owe tax to the state where you were a resident for part of the year and to any state that taxes income sourced to it. Credits often reduce double taxation.

Q: How do I allocate income between states?
A: Allocation rules depend on the income type and state law; wages are commonly allocated by days or by where services were performed, while rental or business income follows source rules.

Professional disclaimer

This article is educational and does not constitute tax or legal advice. For individualized guidance, consult a licensed tax professional who can review your specific facts.

Sources and further reading

If you want, I can create a printable year‑of‑move checklist tailored to the states you’re leaving and arriving in.