Overview
State residency tests determine which state(s) can tax your income and how you must file. If a state classifies you as a resident, it will generally tax you on worldwide income for the year you were a resident. Nonresidents are usually taxed only on income sourced to that state. Part-year residents file differently, allocating income between states for the periods they lived there.
Getting residency right matters because: higher state tax rates, credit rules for taxes paid to other states, and the risk of a residency audit can all change whether you owe additional tax, receive refunds, or face penalties. For federal taxpayers, state residency is separate from federal residency rules; states set their own standards (see IRS and state tax agencies for context). (See IRS basic filing help: https://www.irs.gov)
How states test residency: domicile vs. statutory presence
Most states use two broad concepts to decide residency:
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Domicile (intent): Your permanent home — the place you intend to return to and maintain. States look at where you keep primary ties: driver’s license, voter registration, where your family and most personal belongings are located, and the address you use on financial accounts and tax returns.
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Statutory residency (presence tests): Many states use a day-count rule such as the 183-day threshold (or a comparable test) and combine it with maintaining a residence in the state. For example, New York’s statutory residency rule treats you as a resident if you maintain a permanent place of abode in NY and spend more than 183 days in the state during the tax year (see New York State Department of Taxation and Finance guidance).
Both concepts can apply at once: you can be a domiciliary of State A while meeting a statutory residency test in State B, creating potential dual-residency issues.
Common scenarios and real-world implications
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Move mid-year: If you move from a high-tax state to a no-income-tax state partway through the year, you may be a part-year resident of both states. Each state’s tax laws will determine how to allocate income. In my practice I’ve helped clients who moved from New York to Florida mid-year and had to substantiate the change of domicile (sale of home, FL driver’s license, voter registration) to avoid NY residency claims.
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Remote work and multi-state work travel: A remote worker who performs services in multiple states can create withholding and filing obligations in each state where services are performed. Some states tax based on the physical location where work is performed, not where your employer is located.
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Seasonal residents and snowbirds: Spending winters in a warm climate doesn’t automatically change your domicile. However, crossing a state’s day-count threshold and leaving strong ties in your home state (property, family) can trigger residency claims by your home state.
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Dual residency: You can be classified as a resident by two states—this typically triggers credit rules where one state allows a credit for taxes paid to the other, or you may need to rely on treaty-like tie-breakers in state law or seek relief through the states’ reciprocity and credit systems.
How taxes are calculated when residency changes
- Residents: Taxed on all income, regardless of where earned.
- Nonresidents: Taxed only on income sourced to the state (wages earned in the state, rental income, business income connected to the state).
- Part-year residents: Generally allocate income based on period of residency; each state has forms and methods for the allocation.
States also differ in the credits they allow for taxes paid to other states. Check state instructions and forms when preparing returns.
Practical checklist to establish or relinquish residency
When planning a move or defending a change of residency, take these actions and keep records:
- Change primary address on your driver’s license and vehicle registration.
- Register to vote in the new state and vote there.
- Update your primary bank, health-care providers, and where you file federal taxes.
- Close or limit ties in the old state: sell or rent out homes, terminate local memberships, and move personal belongings.
- Maintain written dates and logs of your physical presence in each state (date-stamped calendars, travel receipts, boarding passes).
- Document financial ties (utility bills, mortgage/rental agreements, paystubs showing state taxes withheld).
In my experience, the most convincing evidence in disputes is consistent, contemporaneous documentation that shows intent and physical presence.
Recordkeeping for audits and disputes
Keep at least three years of tax records, but for residency switches keep records for 4–6 years because some states have longer look-back periods for residency or audits. Relevant materials include:
- Day-by-day presence logs or phone location history.
- Lease or deed documents, utility bills, and homeowner/tenant insurance policies.
- Driver’s license, voter registration, and vehicle registration records.
- Employment records showing work locations and employer withholding.
- Travel receipts and calendar entries that substantiate physical presence.
States and auditors value contemporaneous documentation over retroactive statements.
Common mistakes and how to avoid them
- Relying solely on the “183-day rule.” The presence test is often only part of the equation; domiciliary factors and owning a home matter. (See NY guidance for an example of a two-part test.)
- Forgetting reciprocal agreements and withholding rules. Some neighboring states have reciprocal or commuter agreements that simplify withholding (check your state tax agency).
- Assuming remote work eliminates tax nexus. Performing services in a state generally creates taxable presence there.
- Not updating personal records consistently: inconsistent addresses across financial accounts, voter rolls, and state IDs weaken your position.
Strategies and planning tips
- Plan moves near year-end when possible to limit exposure in both years, but be careful with the timing and local rules.
- Consider withholding and estimated tax adjustments to avoid underpayment penalties in any state where you expect liability.
- If you anticipate multi-state work, proactively consult a tax professional familiar with multi-state filing and reciprocity rules; see our guide on State Residency Strategies for Remote Workers.
- For high-net-worth taxpayers or frequent movers, formalizing intent (e.g., a sworn statement, an estate planning domicile memo) can be helpful when coordinated with an advisor.
When to get professional help
If your situation includes multiple states, high income, property in several states, or an audit notice claiming residency, seek a CPA or tax attorney with multistate experience. I routinely advise clients to get help before filing the first return after a move and to prepare a documentation package that shows the timeline of relocation.
For a deeper dive on how moving affects state filing requirements, see our related article: State Residency Rules: How Moving Impacts Your Tax Liability.
Frequently asked questions
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Can I be a resident of two states? Yes; it’s possible. Most states offer credits or have tie-breaker rules, but dual residency can lead to double filing and complexity.
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Does working remotely for an out-of-state employer protect me from taxation? Not necessarily. States generally tax income earned from work performed within their borders.
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How long should I keep records? Keep residency documentation for at least 4–6 years and tax returns for three to seven years depending on the state and complexity.
Authoritative sources and further reading
- Internal Revenue Service (general filing guidance): https://www.irs.gov
- New York State Department of Taxation and Finance — statutory residency explanation (example of a two-part test): https://www.tax.ny.gov
- Consumer Financial Protection Bureau — basics on state taxes and moving: https://www.consumerfinance.gov
Professional disclaimer: This article is educational and does not replace individualized tax advice. State residency facts can be highly fact-specific; consult a qualified tax professional to evaluate your situation. In my practice, careful recordkeeping and early documentation are the two most effective defenses against unwanted state residency claims.
