Tax Strategies for Multistate Retirees and Seasonal Movers

Background and why this matters

Retirees who split time across states — wintering in Florida, summering in Maine, or traveling between a low-tax and a high-tax state — can unintentionally trigger state tax obligations, audits, or duplicate filings. State tax rules focus on residency (domicile) and statutory presence. Getting residency wrong can cost thousands in extra taxes, interest and penalties and increase audit risk (see state guidance and IRS resources on residency and retirement taxation) (IRS, https://www.irs.gov/retirement-plans; CFPB, https://www.consumerfinance.gov).

In my practice advising retirees for more than 15 years, I’ve seen two recurring problems: (1) clients assume a short-term stay won’t matter, and (2) clients fail to document intent when establishing a new state domicile. Both mistakes often lead to surprise state tax bills or prolonged audits.

Core residency concepts retirees must understand

• Domicile vs. statutory residency: Domicile is your permanent legal home — the state you intend to return to and make your principal place of abode. Statutory residency often relies on a day-count threshold (commonly a 183-day test) plus substantial ties. States differ in how they apply these tests. See our primer on State Tax Residency for a deep dive: State Tax Residency.

• Part-year and nonresident returns: If you change residency mid-year, you typically file a part-year return in each state where you were resident. If you remain resident of one state but earn income in another, file a nonresident return in the second state to report that source income.

• Credits and allocation: Many states give a credit for taxes paid to another state to avoid double taxation, but the credit rules and what counts as ‘tax paid’ vary widely. For how to handle filing across states, see our guide How to file multi-state tax returns.

Practical tax strategies (step-by-step)

1. Establish and document your domicile intentionally

• Actions: obtain a state driver’s license or ID, register to vote, register vehicles, and file a Declaration of Domicile if your state offers one. Move key financial ties (primary bank, primary care physician, mail delivery) to the intended domicile.
• Proof: maintain a written diary or affidavit of intent and a checklist of actions you took to change domicile. States look for consistent, objective ties that match claimed intent.

1. Track days accurately and contemporaneously

• Keep a daily calendar (digital timestamps, photos, receipts, flights/hotel records). Many states will reconstruct your presence using cellphone records, utility bills, or credit-card transactions during audits, so contemporaneous records matter more than memories.

1. Understand how your retirement income is taxed by each state

• Pensions, IRAs, 401(k) distributions, and taxable investment income can be allocated differently across states. Social Security benefits are federally taxed by the IRS only in certain circumstances, but state treatment varies — check state rules.
• In my experience, retirees often underestimate how state rules treat IRA rollovers and required minimum distributions (RMDs). If a distribution is sourced to a period when you were resident in one state, that state may claim it is fully taxable there.

1. Use credits and withholding aggressively when appropriate

• If living in State A but receiving pension income sourced from employment in State B, investigate whether you can claim a credit for taxes paid, or whether State B withholds. Adjust state withholding forms to reflect residency and reduce surprises at filing.

1. Choose property and estate protections as part of the residency decision

• Some states offer generous homestead exemptions, favorable estate/inheritance tax laws, or lower property taxes. These features can outweigh an income-tax advantage depending on your net worth and housing plans (see Homestead and Retirement Home Protection Strategies).

1. Work with a multistate tax specialist before making a move

• Mistakes about domicile or withholding can be costly. A CPA or tax attorney who specializes in multistate issues can model outcomes, prepare declarations, and draft supporting evidence in case of an audit.

Document checklist: what to keep and for how long

• Day-by-day presence log (electronic or paper) — keep permanently
• Driver’s license/state ID application and issuance records — keep until status changes
• Voter registration and ballot history — keep for 7 years
• Utility bills showing primary residence — keep 3–7 years
• Vehicle registrations and insurance documents — keep while authoritative
• Bank statements and address changes — keep 3–7 years
• Medical and professional provider records showing primary care — keep 3–7 years

These are commonly requested by state auditors to assess your physical presence and intent.

Real-world examples and pitfalls

• Case A: Florida-Florida winter resident who claimed Florida domicile but kept a New York driver’s license and voting registration. New York assessed tax because the objective ties pointed back to NY. Outcome: after collecting proof of Florida ties (lease, utility bills, declaration of domicile), the assessment was reduced but not fully eliminated. Lesson: document all ties and proactively change legal registrations.

• Case B: Retiree in Texas (no state income tax) receives pension from California source while wintering in California for four months. California required allocation of pension income tied to periods of employment and presence; withholding and part-year filings were necessary. Result: advance planning and updated withholding saved a sizeable tax bill.

Common mistakes and how to avoid them

• Mistake: Relying on a single change (e.g., buying a home) and neglecting other ties. Fix: create a checklist and follow through on multiple residency signals (license, voter registration, bank accounts, community involvement).
• Mistake: Not filing required part-year or nonresident returns. Fix: model your tax returns for the anticipated move year to estimate liabilities and withholding.
• Mistake: Poor recordkeeping. Fix: use an app or a dedicated calendar and export monthly logs to PDF; keep receipts.

How audits typically work and how to prepare

State audits often start when filing patterns change (a taxpayer who moves from a high-tax to a no-tax state is a red flag). Auditors evaluate: day-counts, domicile indicators, financial ties, and claimed primary residence. If audited, provide organized records and consider professional representation — a letter from a CPA or tax attorney documenting intent and actions can be persuasive.

Tax topics retirees often overlook

• Reciprocal agreements: Some neighboring states have reciprocity for wage withholding (more common for workers than retirees), but check for pension and retirement exceptions.
• Estate and inheritance taxes: A state with no income tax might still have estate taxes; that matters for net worth management and legacy planning.
• Medicare and health care access: Residency decisions can affect Medicaid eligibility and state-specific benefits.

Action plan checklist for a move

1. Run a tax-model for both states for the move year.
2. Change legal documents: driver’s license, voter registration, vehicle registration, address on bank accounts.
3. Establish a primary physician and community ties in the new domicile.
4. File a Declaration of Domicile if available.
5. Keep a daily presence log and export monthly PDFs.
6. Revisit withholding and estimated tax payments.
7. Consult a multistate CPA to review strategy.

Helpful internal resources

• Learn the basics of state residency and what states look for: State Tax Residency.
• Step-by-step instructions for filing across states: How to file multi-state tax returns.
• Consider property protections when deciding domicile: Homestead and Retirement Home Protection Strategies.

Further authoritative resources

• IRS — Retirement Plans and Tax Information: https://www.irs.gov/retirement-plans
• IRS — Tax Topics and Social Security: https://www.irs.gov/taxtopics
• Consumer Financial Protection Bureau — Retirement planning guidance: https://www.consumerfinance.gov

Frequently asked practical questions

• Can I be taxed by two states? Yes. If you have residency ties to one state and source income from another, both states may assert tax claims. Credits for taxes paid to another state reduce double taxation but don’t always eliminate it.
• Will moving to a no-income-tax state eliminate all tax? Not necessarily. Property taxes, sales taxes, estate taxes, and state-specific taxation of retirement income still matter.
• How long should I keep records? Keep primary residency and presence records for at least seven years; day-by-day logs should be kept permanently if possible.

Professional disclaimer

This article is educational and not individualized tax advice. Tax law and state guidance change frequently; consult a qualified CPA or tax attorney familiar with multistate taxation before making residency or distribution decisions.

If you want, I can run a short checklist for your specific pair of states to highlight likely problem areas and filings you should expect. In practice, running a year-of-move tax model is the fastest way to see whether a proposed change of domicile will deliver the tax outcome you expect.