Introduction

Mobile families—those who relocate frequently for work, lifestyle, or family reasons—face special state and local tax (SALT) challenges. Different states have different income tax rates, rules for residency and sourcing, and local taxes that can change your after-tax cash flow, retirement savings, and homeownership costs. This guide gives step-by-step SALT planning you can use before, during, and after a move, with examples, common mistakes, and resources to help you make tax-smart relocation decisions.

Why SALT planning matters for mobile families

  • State income taxes vary from 0% (e.g., Texas, Florida) to progressive rates above 10% (e.g., California, New Jersey). Small differences can add up quickly when wages, capital gains, or business income are large (Tax Foundation).
  • States and localities also differ on property taxes, local payroll taxes, and sales taxes; these affect housing costs, take-home pay, and consumption.
  • Residency rules determine where you owe tax on all income (domicile) versus where you owe on source income (nonresident). Getting residency wrong can create double taxation, unwanted filings, penalties, or audits.

Key SALT components mobile families must watch

  • Income tax: Full-year resident vs part-year resident vs nonresident tax rules; credits for taxes paid to other states; reciprocal agreements for neighboring states.
  • Property tax: Assessment timing, homestead exemptions, and timing of a purchase or sale can change your property tax bill materially.
  • Local taxes: Cities or counties may levy income, school, or transit taxes separate from state obligations.
  • SALT federal deduction cap: For federal itemizers, the state and local tax deduction is limited to $10,000 (combined) as of 2025, which affects high-tax families and changes the after-federal-tax benefit of living in a high-tax state.

Residency basics: domicile, statutory residency and part-year status

  • Domicile: Your permanent home for legal purposes — it’s where you intend to return. Domicile takes into account ties such as voter registration, driver’s license, primary residence, bank relationships, family location, and where you spend time.
  • Statutory residency/Day-count tests: Some states use a day-count (e.g., 183 days) plus a maintenance of a home test. Even short-term or seasonal living can create tax exposure if you meet a state’s threshold.
  • Part-year resident: When you change domicile mid-year, you typically file as a part-year resident in the old and new state and allocate income accordingly.

Actionable SALT planning checklist for mobile families

Before you move

  1. Run a tax projection for the move year and the following 2 years. Factor salary, bonuses, stock/RSU vesting, retirement distributions, and potential sale of a residence. Use current state rates (Tax Foundation is a quick reference).
  2. Decide domicile intentionally. Document steps: change driver’s license, register to vote, update mailing addresses, move financial accounts, and spend time in the new state. Keep a short dated checklist and photos where helpful.
  3. Time income events. If possible, accelerate or delay bonuses, stock sales, or retirement distributions to the tax year when you will be a resident of the lower-tax state.
  4. Consult your employer about withholding and payroll setup. If you relocate mid-year, you may need to change your withholding and estimated tax payments to avoid underpayment penalties.

During the move

  1. Keep a day log. Record nights spent in each state and work locations. Many audits depend on contemporaneous records rather than recollection.
  2. Keep proof of intent. Copies of lease/mortgage, utility bills, enrollment records for children’s schools, and canceled checks help prove domicile.
  3. Notify institutions. Update your driver’s license and voter registration promptly (both strong domicile indicators in many states).

After the move

  1. File correctly: part-year returns and nonresident returns require income allocation; follow instructions on each state’s tax forms.
  2. Claim credits: If you paid tax as a nonresident on income earned in State A while you were a resident of State B, check for credits on your resident return to avoid double taxation—each state’s rules differ.
  3. Review property taxes: Apply for homestead exemptions, senior or veteran exemptions, and verify tax assessment dates (you may reduce first-year taxes by timing the purchase).

Remote work and employer-source issues

  • Sourcing rules: States differ in how they source wage income for telecommuters. Some tax based on where the employer is located, others on where the employee works. This matters when you live in State A and work for a company in State B.
  • Reciprocal agreements: Several neighboring states have reciprocal agreements that exempt nonresident wages from withholding; if you cross a border daily, check for reciprocity and provide the needed forms.
  • Employer withholding: Employers may withhold the state where the employer is located until you’ve set up your new withholding. You may need to file nonresident returns to claim refunds or pay additional tax.

SALT-specific planning tactics to consider

  • Timing income and deductions: Shift taxable events across years when possible to take advantage of residency changes.
  • Use pass-through entity (PTE) workaround where available: Many states adopted PTE elective tax regimes that allow owners to pay state tax at the entity level and claim a federal deduction for the business tax, effectively sidestepping the $10,000 federal SALT cap for owners. Check state-specific rules and consult a CPA. (Tax Foundation analysis)
  • Optimize property tax relief: Research local homestead exemptions, appeals processes, and timing for purchase or sale to reduce assessed values.

Examples (realistic, anonymized)

Example 1: Moving from a high-income state to a no-income-tax state
A family expecting $250,000 in W-2 wages moved from State X (top marginal rate ~9%) to State Y (no income tax). By accelerating a year-end $30,000 bonus into the first post-move year, they avoided roughly $2,700 in state tax in the year the bonus would otherwise have been taxed. They also documented domicile steps (driver’s license, school enrollment) so State X could not treat them as a resident.

Example 2: Remote worker with multistate exposure
A software engineer lived in State A but worked for a company in State B. State A taxes residents on worldwide income; State B taxes wages sourced to it. By tracking days and using a telecommuting carve-out, the engineer limited State B withholding and filed a nonresident return to report only the days physically working there.

Common mistakes mobile families make

  • Failing to document residency change: Verbal intent is rarely enough in an audit. Maintain contemporaneous records.
  • Ignoring income sourcing rules for remote work: Withholding alone won’t determine final tax; check your filing obligations.
  • Overlooking local taxes: City or county income tax or special district taxes can create surprises.
  • Misunderstanding the SALT federal cap: Many assume state tax payments will fully offset federal tax liability—remember the $10,000 cap for itemizers as of 2025.

When special rules apply

  • Military families: Under the Servicemembers Civil Relief Act (SCRA) and the Military Spouse Residency Relief Act (MSRRA), service members and qualifying spouses can often retain domicile in their home state while stationed elsewhere; specific filing rules apply—consult military tax resources and the IRS for guidance.
  • Dual-state homes: If you maintain homes in two states, domicile evidence and time tests become critical. States will review ties like family location, business interests, and community involvement.

Audit risk and documentation

States scrutinize high-income taxpayers and those with sudden lifestyle changes. Keep:

  • A dated calendar or app log of where you physically were each day.
  • Copies of utility bills, lease/mortgage, school records, and voter registration.
  • Employer correspondence about work location and withholding.
    These items materially reduce audit friction and support your residency claim.

Interstate credits and amending returns

If you paid tax to a state where income was sourced, you may be eligible for a credit on your resident return. Rules vary: some states allow credit only for taxes on wages, while others include business or investment income. If you discover a mistake after filing, file amended returns promptly—most state statutes permit refunds if claimed within a specified window.

Useful authoritative resources

  • IRS Publication 521, “Moving Expenses”, for the current federal rules on moving-related tax treatment (note: moving expense deduction is limited to active-duty military in most cases) (irs.gov).
  • Tax Foundation state tax data and analyses for up-to-date rates and comparisons (taxfoundation.org).
  • State revenue department websites for forms, reciprocity details, and residency tests. (Search the state’s official tax authority for specifics.)

Internal guides on FinHelp.io

Frequently asked questions (brief)

Q: How many days can I spend in a state before it taxes me?
A: It depends. Some states use a 183-day test combined with other ties; others have unique statutory residency rules. Always check the state guidance.

Q: Will changing my driver’s license be enough to change domicile?
A: It’s a strong indicator but not definitive. Courts and state tax authorities look at the totality of factors.

Q: Can I avoid state income tax by working remotely?
A: Possibly, but it hinges on sourcing rules. Working physically in a low/no-tax state is different from working remotely for an employer based in a high-tax state.

Professional disclaimer

This article provides general educational information about State and Local Tax (SALT) planning for mobile families and does not constitute individualized tax advice. Tax laws and state rules change. Consult a qualified tax professional or CPA who can analyze your specific facts and help you implement a compliant SALT plan.

Author note

In my 15 years as a CPA and CFP®, I’ve seen families significantly reduce their tax bills and avoid audits by documenting domicile changes, timing income, and coordinating with employers. Proper SALT planning is practical, not just theoretical—put these steps into your move checklist and discuss complex issues with your advisor.

Sources

  • Internal Revenue Service (IRS). Publication 521 and related guidance (irs.gov).
  • Tax Foundation. State and local tax data and analyses (taxfoundation.org).