State Residency Rules: Determining Your Tax Home

Overview

State residency rules determine which state can tax your wages, retirement income, business income, and other sources. For many people — remote workers, seasonal residents, business travelers, and retirees — the difference between a domicile and a temporary presence can change thousands of dollars in taxes. In my practice advising clients for over 15 years, the largest source of risk is weak documentation when a taxpayer changes states.

This article explains the two core residency concepts (domicile and physical presence), practical steps to establish or change your tax home, documentation you should keep, common pitfalls, and how residency interacts with remote work and multistate filing. It also includes links to related FinHelp guides for deeper reading:

• Read our explainer on Tax Home to understand federal “tax home” concepts and how they differ from state residency.
• If you work from anywhere, see Remote Work and State Residency: Avoiding Multistate Tax Surprises for telecommuter-specific rules.
• Planning a move? Our guide How to Stay Compliant When Changing State Residency for Tax Purposes walks through state forms and checklist items.

Authoritative guidance: The IRS discusses the concept of a tax home for federal purposes (IRS: Tax Home) and general residency rules; states publish their own residency tests and instructions (see state tax department websites). For federal guidance see: https://www.irs.gov/individuals/international-taxpayers/tax-home and https://www.irs.gov/taxtopics/tc301.

Core tests states use to decide residency

Most states rely on a combination of the following two tests. The weight given to each test varies by state.

1. Domicile (permanent home)

• Definition: Domicile is the state you intend as your permanent home — where you return after temporary absences. You can have only one domicile at a time.
• Typical indicators: owning or renting a permanent residence, where your driver’s license and voter registration are, where your immediate family lives, and where your personal belongings are kept.

1. Physical presence (day-count or statutory residency)

• Definition: A state may declare you a resident if you spend more than a statutory number of days there during the tax year (commonly 183 days or similar thresholds; some states use 182).
• Note: Some states have a separate “statutory resident” rule that taxes non-domiciliary individuals who spend a set number of days in the state and have a permanent place of abode there (e.g., New York uses similar concepts and high scrutiny for part-year residents).

Other factors states consider:

• Location of employment or business operations
• Where you keep primary financial accounts
• Vehicle registration and driver’s license
• Voting registration and tax filings
• Memberships in local clubs, medical providers, and where children attend school

Each state publishes its residency rules and the evidence it considers. For top concerns (New York, California, and similar high-tax states), expect an aggressive audit approach when residency is unclear.

Step-by-step: How to determine and establish your tax home

Follow these practical steps to make a defensible residency position.

1. Decide your intended domicile and be consistent.

• Choose the state you genuinely intend as your permanent home and take actions that reflect that choice.

1. Update legal and government records promptly.

• Get a driver’s license/ID, register to vote, and change your address with the USPS. These are high-value signals to tax authorities.

1. Move significant ties to your new state.

• Move important documents (bank accounts, medical records), transfer subscriptions, change your primary care physician, and enroll children in local schools if applicable.

1. Re-title and register property and vehicles.

• Transfer vehicle registration, property deeds, and insurance policies to the new state when you can.

1. Employer withholding and payroll.

• Update your state withholding (Form W-4 equivalent) with your employer so taxes reflect your new residence.

1. Document physical presence.

• Keep a contemporaneous calendar, receipts, itineraries, and credit card statements that show where you were on specific dates.

1. Keep proof of reduced ties to the old state.

• Cancel local memberships, terminate leases when you move out, and document dwelling vacancies if you rent out the prior home.

1. File appropriate part-year or nonresident returns.

• When you move mid-year, most states require a part-year return. Follow each state’s instructions for allocating income.

1. Use professional help for complex situations.

• If you split time across high-tax states or have rental/business allocations, consult a CPA or state tax attorney sooner rather than later.

1. Maintain the story.

• The consistent record you create over two to three years is often decisive in audits.

In my work, I’ve seen taxpayers lose residency disputes because they updated only one or two items (for example, changed a driver’s license but kept a permanent home full of possessions and a spouse in the old state). Courts and auditors look at the totality of the evidence.

Documentation checklist (keep for 3–7 years)

• Day-by-day calendar or travel log
• Copies of rental/closing documents, mortgage statements
• Driver’s license or state ID, voter registration
• Utility bills and home insurance showing address and service dates
• Employer payroll records and state withholding forms
• Bank statements showing local accounts and ATM usage
• Vehicle registration and insurance
• School records for dependent children
• Mail-forwarding or address change receipts

Common pitfalls and audit triggers

• Relying only on the 183-day rule: Many states look beyond day counts.
• Keeping a spouse/children at the old home without a clear plan: family ties are powerful residency indicators.
• Inconsistent filings: filing a resident return in State A while claiming primary residence in State B.
• Maintaining a furnished house in the old state and continuing frequent weekend visits without clear intent to abandon the prior domicile.

Audit red flags include: large untimely moves around year-end, dramatic withholding changes without supporting documentation, and owning a primary house in a state while claiming residency elsewhere.

Special situations

• Remote workers and telecommuters: Generally taxed where you reside, not where your employer is; however, some states tax income earned while physically present in their borders or require withholding. See our guide on Remote Work and State Residency.

• Seasonal residents (snowbirds): Many snowbirds avoid residency in winter states by keeping strong ties (domicile) to their home state and documenting day counts. Our guide on seasonal residency planning explains typical strategies.

• Multiple homes and dual residency: You can end up filing in two states. Consider credits for taxes paid to other states but consult a specialist — credits and rules vary.

• Moving for a job: Keep a clear timeline for the move and retain records to support the date you changed domicile. Our guide How to Stay Compliant When Changing State Residency for Tax Purposes provides a practical checklist.

Practical examples

• Case A: A client moved from California to Texas and wanted to stop California withholding. We updated his Texas driver’s license, closed California banking relationships, moved his family and most possessions, and documented day counts. After two tax years of consistent documentation, the client had no California residency assessment.

• Case B: A remote worker split time nearly evenly between Florida and New York. Because he maintained an apartment in New York and spent enough statutory days there, New York considered him a resident. The resolution required carefully allocating income and paying New York resident tax — a costly lesson in the importance of eliminating or documenting a primary home.

Filing and withholding implications

• Resident: Typically you report all income to your resident state, even if earned elsewhere. You may claim credits for taxes paid to other states on the resident return.
• Nonresident: You generally report only income sourced to that state (wages earned there, in-state business income, etc.).
• Part-year resident: You report income for the portion of the year you lived in the state and follow allocation rules.

Always review state instructions and use the state’s tax forms for resident/nonresident/part-year filing. When in doubt, contact a CPA familiar with multistate tax issues.

Next steps and resources

• Begin a contemporaneous travel log today; it’s one of the most persuasive pieces of evidence.
• Update critical documents (driver’s license, voter registration, vehicle registration) as soon as you move.
• If you have complex facts (two homes, business presence, dependent children in a different state), consult a tax professional.

Authoritative sources and further reading:

• IRS: Tax Home — https://www.irs.gov/individuals/international-taxpayers/tax-home
• IRS: Tax Topics and residency concepts — https://www.irs.gov/taxtopics
• State tax department websites (search for residency rules in the states involved)

Professional disclaimer
This article is educational and does not constitute legal, tax, or accounting advice. Residency determinations are fact-specific; consult a qualified CPA or state tax attorney familiar with the states involved before making decisions that affect your tax liabilities.

If you’d like a practical checklist or sample travel log template used in my practice, let a tax advisor prepare one tailored to your situation.