Jan 3, 2023
Changing your domicile – What to consider
Largely in response to the 2017 Tax Cuts and Jobs Act, along with an increase in remote work arrangements stemming from the pandemic, changing the state where you live has become more popular.1 Traditionally, this was a maneuver reserved for retirees fleeing the cold winters and high taxes of the northeast in favor of the mild weather and low-to-no state income tax of the Sunbelt. In decades past it was rather simple: change your driver’s license and have your Social Security checks sent to your new address. Those days are gone!
Now, an individual must provide definitive proof that they’re no longer a resident of their former state, and have clearly and thoroughly established a new domicile in the new state. The initial point of proof is the amount of time spent in each state. Examiners suggest you should be outside your former state more than 183 days each calendar year.2 Certain mobile apps can actually track your time spent in each state and alert you if you’re getting close to your “allotted” days in one location. At this time, TaxBird and TaxDay are two of the more popular options for tracking.
In addition to time spent in one state or another, it’s important to change the location and address of record for items such as insurance policies, bank and investment accounts, family heirlooms/valuables and safe deposit boxes. Further, state examiners recommend establishing medical care in your new state, including primary care physicians and dentists. Pets are not exempt from this practice, and their veterinary medicine provider should also be local to your new residence.
Lastly, it’s important to revisit your estate planning documents. You should consult with your CI Wealth Advisor and an attorney to make the necessary updates to your estate plan, now that you’ve changed residency. This not only serves as an added layer of proof of a domicile change, but will ensure your wishes are honored properly later.
Changing state of residence will also impact tax filing procedures. In 2015, the Supreme Court ruled that two different states could not tax the same income. While this ruling prevents double taxation, it also adds an extra layer of complexity. In many cases, you’ll need to file a tax return for each state in which you lived during the year, and pay taxes on the income you earned while living in each state. Income may include (but is not limited to) employment wages, distributions from retirement accounts, Roth conversions and pension payments.
Below is a handy checklist that, in our view, covers many of the necessary items for you to consider when you change your state of domicile.
- Physical presence
- Own or lease a dwelling in your new state
- Spend as much time as possible in your new state, and remember not to spend more than six months plus a day in your former state of residence
- Update your address on all important documents, such as:
- Bank accounts
- Insurance policies
- Investment accounts
- Estate planning documents
- File for property tax benefits; many states offer residents rebates or credits on property taxes, such as Florida’s “Homestead Exemption,” which allows for a reduction on the assessed value of your property
- File a “Declaration of Domicile” with the records department in your county
- Documentary evidence
- Update your driver’s license
- Register to vote
- Update your state of residence for tax-filing purposes
- Register new address with the Social Security Administration
- Personal matters
- Update the address on all subscriptions and mailings
- Transfer religious, social and professional memberships to your new state
- Relocate personal effects and family heirlooms to your new dwelling
- Consider changing charitable giving to organizations in your new state
ABOUT THE AUTHOR
As an Associate Wealth Advisor, John is responsible for analyzing the client’s financial picture, preparing recommendations, and supporting Wealth Advisors in our development of strategies to help clients reach their goals.
John attended Washington College, earning his degree in Economics while competing for the men’s baseball team. Prior to joining RegentAtlantic, John worked as an advisor at TIAA. In his free time, John enjoys golfing, skiing, and is an avid Yankees fan. He currently resides in Cedar Grove, NJ with his wife, Taylor, and Aussiedoodle, Lola.
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