Quick answer

States decide tax rights using three common concepts: domicile (your permanent home), statutory residency (a days‑based test many states use), and source of income (where income is earned). Which classification applies determines whether you file as a resident, part‑year resident, or nonresident and how your income is allocated between states.

How the tests work

  • Domicile: The state you intend as your permanent home. Courts and tax agencies look at factors such as where you vote, hold a driver’s license, register vehicles, and keep family and personal ties.
  • Statutory residency: Many states treat you as a resident if you maintain a dwelling and spend a specific number of days there (commonly 183 days, though rules vary by state) — check the state tax agency for exact criteria. (See state tax departments and guidance.)
  • Source rules: States tax income sourced to the state (wages earned for work performed there, rental income from property located there, etc.), even if you are a nonresident.

Practical examples (realistic scenarios)

  • Relocating for work: If you move from California to Texas but continue receiving California‑sourced wages or keep significant ties to California, California may still tax that income until you sever domicile there. In my practice I’ve seen clients miss withholding changes during a move and face unexpected tax bills.
  • Remote work across states: A remote employee living in New York but working for an employer based in Ohio may owe taxes to New York (resident) and/or Ohio (source), depending on state rules and any reciprocity agreements.

Who is most affected

  • Frequent travelers, digital nomads, and remote employees who work across state lines
  • People who maintain homes in multiple states or move mid‑year
  • Retirees who winter in a different state

Steps to reduce risk and manage filings

  1. Track days in each state: Keep a calendar, travel records, and proof of residence for the year. Day counts are central to statutory residency claims.
  2. Document domicile changes: Update your driver’s license, voter registration, mail address, banking relationships, and sell or formally terminate ties to the prior state to support a domicile change.
  3. Review withholding and estimated taxes: Update employer withholding and state estimated payments when you change residency or work location.
  4. Claim credits and apportion income: When taxed by two states, you may claim a credit on your resident return for taxes paid to another state or apportion income if you’re a part‑year resident. See multistate filing guidance to determine available credits.

Common mistakes to avoid

  • Relying on intuition: Assume residency is simple — it’s fact‑intensive and varies by state.
  • Failing to keep records: Without contemporaneous documentation, proving a domicile change is harder in an audit.
  • Ignoring withholding: Employer payroll may not automatically follow your move—check and update your W‑4/state withholding form.

Audit defense and proof of domicile

If a state auditor questions your residency, these items help: copies of leases or property deeds, utility bills, voter registration, driver’s license, employment records, and travel logs. Many states have specific audit guides—review the relevant state tax agency guidance and consult a CPA or tax attorney.

Resources and next steps

Author’s note: In my 15+ years advising clients, the simplest, most effective protection is contemporaneous records and proactively updating legal ties (license, voter registration, address). Small, early actions often prevent costly audits.

Authoritative references: state tax agencies and guidance (varies by state); IRS resources on residency and filing (IRS.gov); consumer guidance on moving and taxes (Consumer Financial Protection Bureau). Always check the specific state tax agency for precise rules.

Professional disclaimer: This article is educational and not personalized tax advice. Consult a licensed CPA, enrolled agent, or tax attorney for advice tailored to your situation.