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Wealth Planning

Changing your state of residence

When moving to a new state, you should sever all ties to your former state;
half-measures can leave you open to tax claims by your former home state

You really have to leave

Many states, especially those that levy a state income tax, are very active in challenging claims by former residents that they have moved out of state and changed their tax domicile. These states may attempt to use any tie that a former resident maintains with them to justify their continuing to tax the former resident.

In order for your move to be respected, you really have to move—half-measures could leave you open to claims by your former home state that it should still be able to tax you. Domicile for tax purposes is a matter of intent; that intent is implied by your actions.

How do you leave?

Changing your residence is a legal matter, so you should contact your independent legal and tax advisors before undertaking any action. What follows is a checklist of items to consider. Although there’s no bright-line rule, the more of these you fulfill, the more likely it is that you will be deemed to have changed your residence for tax purposes.

  • Change your driver’s license to your new state and cancel your old state’s driver’s license
  • Register your car in your new state and notify your insurance company of the change
  • Register to vote in your new state and cancel your old state’s registration
  • Move your religious affiliation and membership to a local group or house of worship in your new state; make local contributions
  • Buy a home in your new state—and if possible, sell your home in your old state (or transfer it to family members or other entities); if you can’t buy right away, rent with a long term lease
  • Claim a homestead exemption in your new state (if applicable), and relinquish any homestead claim in your old state
  • Revise your estate planning documents (wills, trusts, powers of attorney, health care powers of attorney. advance care directives, etc.) to recite your new state, and use your new state’s forms
  • Change your bank accounts to your new state and don’t retain bank accounts in your former state
  • Move your safe deposit box to your new state
  • Obtain a library card in your new state
  • Change social clubs and service clubs (e.g., Rotary, Kiwanis, golf club, etc.) to your new state; serve on local charitable boards
  • Engage local medical professionals; send your medical records to them
  • Change your address with the IRS—list your new address on your returns
  • Notify vendors (credit cards, brokerage, etc.) of your new address
  • Generally, focus your activity (economic, social, financial) in your new state

Be careful with your timing

As a general rule, you want to stay out of your former state more than 183 days in each calendar year, although this number may vary by state. The closer you are to the threshold, the more likely your former state will want you to prove that you were outside of that state for more than 183 days. Keep a daily calendar (with receipts, if possible) showing that you were outside your former state for each day. In the first year you claim non-resident status in your former state, you may be more likely to experience a residency audit than in future years, regardless of how close you are to the threshold.

Although you don’t have to be in your new state for more than 183 days, your former state will look at how many days you spent in your new state as one factor in determining whether you have established residency in the new state.

Contact your J.P. Morgan Advisor to discuss any plans you have to move to a new home state.

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