State Residency Tests: How States Determine Your Tax Home

How do state residency tests determine your tax home?

States use a blend of bright‑line rules and more subjective factors to decide whether you are a resident for state income‑tax purposes. That determination — often called your “tax home” in state discussions — controls which state can tax your worldwide income, which income is allocated, and whether you qualify for credits to prevent double taxation.

Below I explain the most common tests, how states apply them, practical examples from my practice, and step‑by‑step actions you can take to document or change your residency. This is educational information only; consult a tax professional about your facts and state law.

Two main approaches: statutory vs. common‑law domicile

• Statutory tests. Many states use clear statutory rules. The best‑known example is the so‑called “183‑day rule”: if you spend 183 days or more in the state during a calendar year and meet other statutory elements (often including maintaining a permanent place of abode), you may be a statutory resident of that state. However, the exact phrasing and required additional elements vary by state.

• Common‑law (domicile) tests. Other states look to whether you are domiciled in the state — whether you intend it to be your permanent home. Domicile is highly fact‑specific and focuses on where you intend to return when away. Courts weigh driver’s license, voter registration, family location, and where your primary possessions are kept.

Many states effectively use both: a statutory residency rule plus a separate domicile standard.

(For background on inter‑state enforcement and policy coordination, see the Multistate Tax Commission and state tax departments: https://www.mtc.gov and state tax agency sites.)

Common elements states evaluate

1. Days present in the state

• States commonly count calendar‑day presence; partial days may count. Keep a contemporaneous log. The 183‑day threshold is common but not universal.

1. A permanent place of abode

• Having a house, condo, or long‑term rental available to you can be decisive. Some states require both the 183‑day test and a permanent place of abode to trigger statutory residency.

1. Domicile or intent

• Evidence of intent to make a state your permanent home: where you register to vote, your driver’s license, vehicle registration, and where you list as your primary address on tax forms and financial accounts.

1. Family and social ties

• Where your spouse and children live, where your doctors are, memberships in local clubs and religious organizations — all can show where your life is centered.

1. Business and financial connections

• Location of employment, business offices, bank accounts, professional licenses, and where you receive mail are relevant.

1. Convenience‑of‑employer and special rules

• Some states have special rules that tax remote work differently. New York’s “convenience of the employer” rule (still enforced in 2025) taxes nonresidents for days working remotely for a NY employer unless the remote work is for the employer’s necessity rather than employee convenience. Check the receiving state’s guidance.

How residency affects filing and taxes

• Resident returns: If a state treats you as a resident, you normally must report all income to that state, regardless of where it was earned. The state may allow credits for taxes paid to other states on the same income.

• Nonresident returns: States tax nonresidents only on income sourced to that state (wages earned there, business income, rental property located there).

• Part‑year residents: When you move during a tax year, you typically file as a part‑year resident for each state you lived in and apportion income accordingly.

• Double residency: If two states both claim you as a resident, you can face double taxation. Most states offer credits for taxes paid to another state, but the rules and relief vary; resolving dual‑residency often requires tracing domicile, days present, and allocation rules.

Real‑world examples from practice

• Case: Frequent traveler with retained home. I worked with a client who traveled for six months on assignment but kept a house and family in State A. They spent 120 days outside State A, 245 days in State A, and maintained the family home and all bills there. Under State A’s law (which required 183 days and a permanent place of abode), they were statutory residents and had to report all income to State A. Proper documentation of travel and employer assignments was critical to avoid penalties.

• Remote‑worker trap. A remote worker moved to State B but continued teleworking for an employer based in State C. State C applied a sourcing rule to tax wages for days worked while physically present in State C and, in some circumstances, attempted to tax remote days using its convenience rule. The employee needed to track days and assert nonresident status; however, this required careful documentation and, eventually, coordination of a withholding change with the employer.

Practical steps to document residency (or a change of domicile)

1. Keep a contemporaneous day‑count log. Note arrival/departure times, overnight stays, work remote days, and business travel. Mobile‑calendar exports and travel receipts help.

2. Centralize your primary address. Use one mailing address consistently for tax forms, employer records, bank statements, and benefits.

3. Change key official records when you change domicile: driver’s license, voter registration, vehicle registration, and tax withholding. The timing of these changes is a key evidence point.

4. Close or explain ties in the former state. Sell or formally lease out a home, transfer professional licenses, and update local memberships. If you keep a property, document why (investment vs. intent to return).

5. Manage employer withholding and payroll addresses. Incorrect withholding often triggers state notices and audits.

6. Create a residency package if asked. If audited, gather utility bills, lease or closing statements, school registrations, medical records, and affidavits showing intent.

Audit triggers and how to contest a residency determination

Common triggers: sudden move to a low‑tax state, conflicting addresses on federal and state forms, high income with remote work, large scale vacations or second homes. If a state issues a residency notice:

• Respond quickly and supply contemporaneous documents.
• Request an administrative appeal with the state tax agency; many states provide protest and hearing rights.
• Consider anonymous pre‑clearance tools some states offer for domicile issues (varies by state).
• If necessary, litigate: residency disputes often end up in tax court or state trial courts, where the fact pattern matters more than checklist rules.

Tips to avoid costly mistakes

• Don’t assume days‑count alone tells the story. Domicile factors can override a day count in some cases.
• Treat tax home and domicile as separate but related concepts. Your “tax home” for federal travel‑expense purposes may differ from your domicile for state income tax.
• When moving for tax reasons, change facts irrevocably: move family, change clubs, and shift primary banking relationships. Courts look for consistent, genuine changes.

Quick checklist before you file

• Have you counted days in each state and kept proof?
• Is there a single declared primary address used on tax and financial records?
• Have you updated your driver’s license, voter registration, and vehicle registration?
• Does your employer withhold state tax correctly?
• If you have income sourced to another state, are you prepared to file nonresident returns there and claim credits where applicable?

Internal resources and further reading

For more on strategies and resolving dual‑state issues, see these FinHelp guides:

• State Residency Tax Strategies for Frequent Movers
• Resolving Dual-State Residency for Income Tax Purposes
• State Residency Rules: Determining Where You Owe Income Tax

Authoritative sources

• Multistate Tax Commission (policy and group coordination): https://www.mtc.gov
• Internal Revenue Service (for federal tax home definitions and international residency guidance): https://www.irs.gov
• Individual state tax department guidance — search the tax agency website for the state(s) in question (e.g., New York Department of Taxation & Finance, California Franchise Tax Board).

Professional disclaimer

This article is educational and does not constitute legal or tax advice. Residency rules are state laws and change; consult a qualified CPA, tax attorney, or your state tax agency about your specific situation. In my practice I frequently recommend documenting facts contemporaneously and seeking professional review when moves or remote work could affect state residency.

Final takeaway

State residency tests mix objective day counts with subjective intent and ties. Proper recordkeeping, consistent administrative changes, and early coordination with employers and tax advisors are the best ways to avoid surprise tax bills, audits, or double taxation.