Making Sure You Properly Changed Your State Of Tax Residence

In the April issue of Retirement Watch, I explain the steps to take to ensure you’ve legally changed your state of residence. If you don’t take the right steps, a state you thought you moved from might try to assess income taxes on you or estate taxes on your estate. Here’s the most recent case on this issue, involving an athlete who used to live in California. He had to fight the state of California to prove he really was a resident elsewhere. He took him a lot of work and probably a lot of money to pay his professionals for help. When you move, realize ahead of time the staet might claim you didn’t move, and prepare your case before there is one.

Tax domicile has become a more pressing issue as states seek to generate additional revenue. The standard definition of domicile is “the place which an individual intends to be his or her permanent home and to which such individual intends to return whenever absent.” When domicile is not clear, over 28 states have created tests in order to determine if an individual is a resident, typically a days-in-and-out equation, with 183-day-presence being the most common. Most states often see domicile and residence as the same thing.

But California focuses on facts and circumstances. While an individual’s intent is considered when determining domicile, the FTB also looks at the individual’s acts and declarations.