Why state residency matters

Moving across state lines may change which state can tax your wages, retirement income, Social Security, capital gains, and estate. Some states have no individual income tax (for example, Florida and Texas), while others levy high marginal rates (for example, California). Even if you think a move is simple, states evaluate multiple factors — not only where you sleep — before accepting your claim of new residency.

Authorities that commonly review residency include state tax departments and, sometimes, auditors working for the former state. The IRS does not set state residency rules but provides federal forms and guidance (for example, Form 8822 for notifying the IRS of an address change) that are useful when documenting a move (IRS, Form 8822). For state rules, consult the state tax agency where you currently live and where you intend to move.

(See related: State Tax Residency Planning for High-Mobility Individuals: https://finhelp.io/glossary/state-tax-residency-planning-for-high-mobility-individuals/)

How states decide residency: common tests and terms

  • Domicile: Your legal home — the place you intend to return to after temporary absences. Domicile is a fact-intensive legal standard used by many states.
  • Physical presence / day-count tests: Several states use a days-based rule (commonly a 183-day standard) to determine if you are a resident for the year. Note: the exact day-count rule and counting methods differ by state.
  • Statutory residency: Some states treat you as a resident if you maintain a residence in the state and spend more than a threshold of days there, regardless of domicile.
  • Tie-breaker factors: Courts and revenue departments weigh things like where you vote, where your family lives, location of primary bank and safe-deposit box, driver’s license and vehicle registration, location of doctors and advisors, membership lists, utility bills, and social relationships.

No single test controls every situation. A state audit looks for consistency across many items to decide if you legitimately changed your tax home.

Practical checklist to establish residency (and reduce audit risk)

  1. Set a clear move date and keep contemporaneous records. Lease or purchase agreements with dates are critical.
  2. Update government IDs and registrations soon after moving: driver’s license, vehicle registration, voter registration, and tax withholdings.
  3. Change primary accounts and services: bank accounts, primary care physician, dentist, and neighborhood/utility accounts in the new state.
  4. Sever significant ties to the former state: close local accounts you won’t use, sell or rent former home if feasible, and update beneficiaries and estate documents to reflect the new address.
  5. Re-register to vote and file a Declaration of Domicile or similar document if the new state offers it.
  6. Document physical presence. Maintain a calendar, travel logs, and receipts showing where you were on particular dates.
  7. Notify employers and update payroll withholding to reflect new state tax requirements.
  8. Save proof of intent and actions (emails, contracts, moving company receipts, school enrollment records for children).

(Internal resource: Filing State Returns After You Move: Residency and Part-Year Rules: https://finhelp.io/glossary/filing-state-returns-after-you-move-residency-and-part-year-rules/)

Documentation that carries weight in audits

  • Lease or mortgage with move-in date
  • Utility bills with service start dates (electric, water, internet)
  • Driver’s license and vehicle registration change dates
  • Voter registration and absentee ballot records
  • Employment records, paystubs showing withholding changes
  • Medical records showing primary care in the new state
  • Travel logs showing days spent in each state (airline receipts, toll records, calendars)
  • Bank and investment account statements showing primary address

Keep these for at least three to seven years; many states have statutes of limitations and look-back periods for residency audits.

Common relocation scenarios and tax effects

  • Moving from a state with high income tax to a no-income-tax state: Potentially large savings on wages and investment income, but consider other costs (higher sales or property taxes) and non-tax expenses like moving costs and changes in living costs.
  • Snowbirds and split-year residency: Retirees who spend winters in one state and summers in another must carefully document primary residence to avoid dual-residency claims.
  • Remote workers: Frequent cross-border remote work can create nexus and withholding obligations in multiple states. Employers and employees must coordinate on withholding and state income tax filings. See our guide: Filing State Taxes for Remote Workers: Residency Rules: https://finhelp.io/glossary/filing-state-taxes-for-remote-workers-residency-rules/.
  • Part-year residence: You will commonly file as a part-year resident in each state where you lived during the tax year. Each state has specific rules for allocating income earned before and after the move.

Dual residency and nonresident audits

It’s possible to be treated as a resident by two states in the same year. If that happens, states typically allow credits to avoid double taxation when one state taxes income that was also taxed by another — but the rules and availability of credits vary. Successful defense against dual residency claims requires strong documentation of intent and location of ties.

If audited by your former state, respond promptly. Provide contemporaneous evidence of the move and proof you severed ties. If you disagree with a state determination, the administrative appeals process and, if necessary, tax court are options, but appeals are time-consuming and costly.

Special tax items to watch when you move

  • Retirement income and pensions: Some states tax certain retirement income while others do not; state tax treatment is often age- or income-dependent.
  • Social Security: Social Security benefits are not taxable by the federal government for most retirees, but some states tax a portion of it.
  • Capital gains and sale of home: The year you sell real estate near the time of your move can create allocation questions about capital gains responsibility.
  • Estate and inheritance taxes: Residency can affect state-level estate taxes and who needs to file an estate return.
  • Business nexus: If you own a business, moving can change sales tax, franchise tax, and corporate income tax exposure.

Reasonable timeline and realistic expectations

There’s no universal “overnight” strategy. Many states look at your actions over months or years. In practice, I tell clients to expect at least one year of consistent behavior and documentation to solidify a new domicile claim. Quick changes (like updating a license without severing other ties) are easy for the former state to challenge.

Example from practice: A client who moved from New York to Florida updated their license, changed voter registration, and leased a Florida home while closing NY bank accounts and selling their NY property. With strong documentation, they successfully established Florida domicile in the tax year of the move (state records and legal filings supported the change). Consistency was the decisive factor.

Red flags that invite scrutiny

  • Maintaining an expensive home in the former state while claiming a new domicile elsewhere without substantial evidence of severed ties
  • Failing to update voter registration, driver’s license, or primary bank accounts
  • Spending most of the calendar year in the former state despite asserting a new domicile
  • Keeping close family (spouse and minor children) in the former state while claiming a different primary residence

Professional tips before you move

  • Run a pre-move tax projection comparing total tax burden (state income, property, sales, and other local taxes) and non-tax living costs.
  • Coordinate with your employer about payroll withholding, especially if the move occurs mid-year.
  • If you have complex income (partnership K-1s, S corporation distributions, large capital gains), consult a CPA or tax attorney before finalizing the move.
  • Consider recording a Declaration of Domicile where available; it is not foolproof but strengthens your record.

When to get professional help

Engage a CPA or tax attorney if:

  • Your anticipated state tax savings are large enough to justify the cost of professional advice.
  • You have frequent interstate travel or work in multiple states.
  • You own businesses or rental property in multiple states.
  • You face a residency audit or receive a notice from a state tax agency.

(Internal link — related reading: Resolving Dual-State Residency for Income Tax Purposes: https://finhelp.io/glossary/resolving-dual-state-residency-for-income-tax-purposes/)

Bottom line

State residency and relocation are more than a change of address. States look for consistent, compelling evidence of where you truly live and intend to remain. Document your move, update official records, and evaluate the full financial picture — not only income tax rates. When in doubt, consult a licensed tax professional familiar with the states involved.

Professional disclaimer

This article is educational and does not replace personalized tax, legal, or financial advice. For specific questions about your situation, consult a licensed CPA, tax attorney, or your state tax agency.

Authoritative sources and further reading

(These links are provided for general reference. State rules change; always confirm specific residency tests and tax rates with the state revenue department.)