Key Takeaways
- Moving States and Common Issues
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Multiple Moves Fail to Shift Alabama Couple’s Domicile
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California Finds Taxpayers Still Residents Across Several Rulings
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Massachusetts Confirms Tax on Gain Tied to Previous Residency
Moving States? Navigating State Residency to Avoid Double Taxation
Colette Sutton, Eide Bailly
With remote work and frequent travel, establishing—and abandoning—state residency and domicile have become increasingly complex. Many people relocate to states, often with lower or no income taxes, only to receive unexpected tax bills from their previous state. This is especially common for the following:
- Business owners;
- Individuals maintaining a personal residence (particularly with a homestead exemption);
- Taxpayers moving abroad;
- Couples living in different states; and
- Individuals receiving certain types of income (e.g. stock gains, partnership income, and other intangible income).
Changing your residency or domicile requires careful planning, especially if you fall into one of these categories. A common misconception is that updating your driver’s license, vehicle registration, or voter information is enough to establish a new domicile. In reality, these steps may help meet residency requirements, but they rarely prove a change in domicile, increasing the risk of being taxed by more than one state.
Understanding Domicile vs. Residency
Domicile refers to your true, fixed, and permanent home—the place you intend to return to after any “absence.” That absence could be a short vacation, years away in college, or even a temporary move to another state for work, as long as you plan to return eventually—even years later.
You can only have one domicile at a time. To establish a new one, you must completely abandon your previous domicile. This requires two things:
- Intent: a genuine plan to make the new location your permanent home
- Physical presence: Actually living there
Residency, on the other hand, is easier to establish and can exist in multiple states at once. The most common way is by spending a certain number of days in a state—typically 183 days (half the year). Another way is by maintaining a permanent place of abode. Residency rules vary by state, for example:
- California: Uses a subjective standard, reviewing many factors case-by-case.
- New York: You’re a resident if you maintain a permanent abode for most of the year and spend 184+ days there. (Even part of a day counts as a full day for residency purposes.)
- Ohio: Applies a 212-day “contact period” based on overnight stays.
- Oregon: Requires a permanent abode and more than 200 days in the state.
- Utah: Considers you a resident if you maintain an abode and spend 183+ days there. You may also qualify if your spouse is domiciled in Utah and you file jointly on your federal tax return.
Bottom line, you can only have one domicile at a time, but you may be a resident of multiple states for tax purposes. Residency is easier to establish than domicile, and failing to abandon your old domicile can result in double taxation.
Can You Be Taxed By Multiple States?
Short answer, yes. Most states have the authority to tax all income earned by their residents—whether you’re domiciled there or meet residency requirements. This means if you’re domiciled in one state but considered a resident of another, both states can tax your entire income.
One major drawback? If you’re classified as a resident in two states, you typically cannot claim a credit for taxes paid to the other state. This benefit usually applies only when you’re a resident of one state and a nonresident of another.
Key Considerations When Moving
To successfully claim a new domicile, you’ll likely need extensive documentation proving your intent and actions. State auditors—and sometimes your accountant—may ask questions that feel personal, but this is necessary to avoid double taxation.
Common factors used to determine domicile and residency include:
- Driver’s license and vehicle registration
- Voting history
- Maintaining a residence
- Time spent in each state and reasons for spending time in each state
- Location of spouse and family
- Homestead status for property tax
- Reason(s) for moving
- Location of doctors, accountants, attorneys, etc.
- Location of business, if applicable
- Community involvement (church, gym and club membership, social groups)
- Ownership of other real property
Reach out to Eide Bailly State & Local Tax team. We’ll help you navigate these rules and avoid costly pitfalls like double taxation.
Recent Cases and Articles on State Residency Issues
ALABAMA
Tax Tribunal: Couple Traveling for Work Remained Alabama Residents - Cameron Browne, Tax Notes ($):
In its April 25 consolidated decision in Hendrickson v. Department of Revenue, the tax tribunal affirmed income assessments against Gary and Tonya Hendrickson after determining that they were Alabama residents during the 2014 and 2019 tax years.
CALIFORNIA
California OTA Upholds Residency Determination Against Former Surgeon - Cameron Browne, Tax Notes ($):
In Matter of Tran and Medina, the OTA upheld approximately $6.58 million in additional income taxes and penalties levied against a taxpayer who claimed he was a Nevada resident for the 2007 through 2009 tax years. The opinion, dated April 28, was released on June 2.
California OTA Upholds Residency Determination Against Comedian - Cameron Browne, Tax Notes ($):
In Matter of Peters, the OTA upheld a $2.1 million state income tax assessment against the comedian, finding that he was a resident of California, not Nevada, for the years at issue. The opinion, dated June 27, was released on September 2.
California OTA Rejects Taxpayer's Out-of-State Residency Claim - Caitlin Mullaney, Tax Notes ($):
In Matter of the Appeal of Lunt, the California OTA upheld the California Franchise Tax Board’s determination assessing J. Lunt $12,315 in additional income tax liability, plus penalties and interest, for the 2018 tax year. The OTA held that Lunt was subject to taxation as a California resident, despite Lunt claiming to be a Montana resident and his filing of a California nonresident return. The decision, dated September 4, was released on November 3.
MASSACHUSETTS
Exec Asks Mass. Justices To Review $4.7M Stock Tax Case - Sanjay Talwani, Law360 ($):
In an application for further appellate review Tuesday, Craig and Natalia Welch urged the Massachusetts Supreme Judicial Court to reverse an appeals court ruling that found them liable for state tax on the sales of stock in AcadiaSoft Inc., a software company co-founded by Craig Welch.
NEW HAMPSHIRE
New Hampshire Couple Held Liable for $1 Million in Dividends Tax - Richard Tzul, Bloomberg Tax ($):
Robert and Mary Morris obtained New Hampshire drivers’ licenses, registered to vote, and owned a home in New London, signaling an intent to relocate from Connecticut and establish residency, Justice Melissa B. Countway said. While the Morris couple said they ultimately decided not to retire in New Hampshire and only took “preliminary” steps to move there, their actions were enough to make them residents from June to December 2017, the opinion said.
UTAH
Wyoming Man Liable for Utah Taxes Under State Domicile Law - Caitlin Mullaney, Tax Notes ($):
In a July 25 decision in Tischmak v. Utah State Tax Commission, the Utah Supreme Court upheld state income tax liabilities against Terry Tischmak, who resides in Wyoming but was married to a Utah resident student, rejecting his claim that Utah's domicile statute is unconstitutional.
VIRGINIA
Taxpayer Wins Appeal on Virginia Residency Determination - Colette Sutton, Eide Bailly:
After examining the taxpayer’s circumstances—including moves between states, employment, and ties to Virginia—the Department concluded the taxpayer had established domicile in another state as of December 2019. Despite retaining a Virginia driver’s license and vehicle registration, these factors were outweighed by evidence of intent to reside elsewhere, especially given pandemic-related disruptions.
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
Consulting on Residency and Domicile at Eide Bailly - Todd Folle
Some examples of projects we have worked on include relocating a high-net-worth family’s trust to a lower-tax jurisdiction, planning for a married couple living in separate states, and determining residency for a client that moved abroad.
Ideally, we assist before these changes occur, but we're also here when plans go awry and clients need to defend past decisions. If you are facing a residency or domicile change, reach out to Eide Bailly’s SALT team to make ensure your transition is smooth and tax-efficient.
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