Immediate overview

Moving between states can trigger tax responsibilities in both your old and new states. These obligations depend on residency rules, where income was earned (sourcing), and the type of income (wages, business income, rental income, retirement). In my 15+ years helping clients with relocations, the single most useful habit is keeping tidy, dated records of where you lived and where you worked. That simple practice resolves many disputes and makes part‑year or multi‑state returns far easier to prepare.

Authoritative sources: see the IRS for federal filing basics (irs.gov) and the Tax Foundation for state-by-state tax context (taxfoundation.org). For state specifics, always reference the taxing authority in each state.

Why this matters

States set residency, sourcing, and filing rules differently. If you don’t follow them you can face: back taxes, penalties, withholding mismatches, and unexpected tax bills. Common scenarios where multi-state obligations appear:

  • You moved midyear and earned wages in both states.
  • You continued working remotely for an employer based in your old state after moving.
  • You own rental properties or an operating business in another state.
  • You receive retirement or investment income sourced to a different state.

If you want a deeper primer on mid-year filing options, see this FinHelp article on how moving during the year affects your tax filing options.

Quick checklist (high level)

  1. Confirm your residency status in each state (resident, part‑year resident, nonresident).
  2. Determine the sourcing of each income type (wages, business income, rental income, retirement, etc.).
  3. File required state returns (part‑year or nonresident returns where appropriate).
  4. Claim credits for taxes paid to another state where allowed.
  5. Update withholding and employer/state tax forms to reflect new state residency.
  6. Keep records: move date, leases/mortgage, utility bills, employer records, and travel logs.
  7. Consult a CPA for complex situations (business nexus, multiple rental properties, or high‑value income).

Each step is explained below with practical examples and actions.

How to determine residency

States use different tests to decide if you are a resident for tax purposes. Common tests include:

  • Domicile test: your permanent legal home (where you intend to return).
  • Physical presence or day count: some states use a specific number of days.
  • Intent and ties: where you vote, driver’s license, vehicle registration, family location, and where you spend the most time.

Tip from practice: treat domicile as a legal finding, not just where you sleep. Changing domicile requires clear, documented actions—registering to vote, selling or leasing the old home, changing driver’s license and auto registration, and shifting financial accounts.

See FinHelp’s guide on state residency rules for how states weigh these factors.

Sourcing income: who gets tax rights

States tax income based on where it is earned (sourcing) and where you are a resident. Common rules:

  • Wages: often taxed by the state where the work is performed. Remote work can create claims in both the employer’s state and the employee’s state.
  • Business income: allocated or apportioned using payroll, sales, and property factors—varies by state.
  • Rental income: taxed in the state where the property is located.
  • Retirement income: taxed according to state rules—some states exempt or partially tax pensions and retirement plans.

Example: If you worked in State A for January–June and then moved to State B and worked remotely for the same employer July–December, State A typically taxes wages earned while you physically worked there; State B taxes wages earned while you were a resident there. Some states assert broader sourcing for telecommuters—check state guidance.

Filing rules and credits to avoid double taxation

Most commonly you will file:

  • A part‑year resident return in your old state (report income earned while a resident).
  • A part‑year or resident return in your new state (report income earned while a resident and possibly income sourced to that state).

Many states offer a credit for taxes paid to another state on the same income. The credit calculation and eligibility rules differ by state. Keep documentation of pay stubs, W‑2s, 1099s, and employer letters showing where and when income was earned.

Practical step: when both states claim the same income, compute the tax both ways and use the nonresident/credit rules from each state to see where a credit applies. If credits don’t cover the entire overlap, consult a tax pro.

Related FinHelp reading: State tax deductions and credits to consider when moving.

Withholding and payroll adjustments

Update your employer and payroll department immediately after moving. If your old state continues to withhold, you may need to:

  • Request a change to your state withholding form (e.g., new state’s withholding form).
  • Submit a letter to payroll documenting your move and effective date.
  • If your old employer refuses to adjust, you may need to file a nonresident return in the employer state to reclaim overwithheld amounts.

For employees moving mid‑year, check whether your new state has reciprocity agreements with your former state—these can eliminate dual withholding (common in neighboring states).

Business owners and nexus

Businesses face a separate and often more complex set of rules called nexus—whether a state can tax a business’ income. Moving a business, having remote employees, or having property in another state can create or change nexus.

Key actions for business owners:

  • Review state nexus rules (sales, payroll, property, economic thresholds).
  • Recalculate apportionment factors for the tax year you moved.
  • Update sales tax registrations and payroll tax accounts.

If you’re unsure about nexus, see FinHelp’s post on establishing state tax nexus for remote service providers and consult a business tax adviser.

Special situations

  • Rental properties: File returns in the state where the property is located and allocate expenses appropriately.
  • Retirement income: Verify whether the new state taxes pensions, IRAs, or Social Security; state exemptions vary widely.
  • Stock sales and capital gains: Source rules depend on residency at the time of sale and state rules for capital gains.

Common mistakes to avoid

  • Forgetting to update your address with your employer, brokerages, and pension administrator.
  • Assuming no state income tax in the new state means no filing obligations elsewhere.
  • Neglecting to collect documentation proving move dates and days physically present in each state.
  • Failing to examine reciprocity or credits which can reduce or eliminate double tax.

Actionable, dated checklist (do these within 30–90 days of a move)

  1. Set the official move date and record it (closing statement, lease start date, utility start/stop).
  2. Change driver’s license, vehicle registration, and voter registration to the new state.
  3. Tell payroll and update withholding forms; request a written confirmation.
  4. Gather pay stubs and 1099s and label them by state and period.
  5. If you own a business or rental property, review nexus and file any new registrations.
  6. If you expect overlap in tax liability, estimate expected state tax due using tax calculators or a CPA.
  7. Keep travel logs for days spent in each state if you anticipate residency disputes.

When to contact a tax professional

Contact a CPA or state tax attorney if you:

  • Have significant income sourced to multiple states.
  • Own out-of-state rental property or operate a multi-state business.
  • Face an unexpected notice or assessment from a state tax agency.
  • Are trying to change domicile for tax planning—this has legal and audit implications.

In my practice, small documentation issues frequently cause audits. A CPA can formalize your evidence of domicile and prepare coordinated returns that minimize double taxation.

Penalties, audits, and amending returns

If you miss a state return, states can assess penalties and interest. If you discover an error, amend the state return(s) promptly—each state has its own amendment process and deadline. If assessed, respond promptly and seek penalty abatement if you have reasonable cause.

Final notes and resources

This checklist is educational and does not replace personalized tax advice. For federal guidance see the IRS (irs.gov). For state-specific rules, contact the state department of revenue for each state involved. For broader context, the Tax Foundation maintains state tax overviews (taxfoundation.org).

Related FinHelp resources:

Professional disclaimer: This article offers general information about multi‑state tax obligations after moving and does not constitute legal or tax advice. Your situation may require tailored guidance; consult a qualified CPA or tax attorney licensed in the relevant state(s). Information is current as of 2025 but state rules change—verify with state revenue departments before filing.

Author: Senior Financial Content Editor, FinHelp.io. In practice I’ve prepared hundreds of part‑year and multi‑state returns; careful documentation and early payroll updates typically prevent the largest headaches.