State Residency: How Can You Change Your Residence to Another State?
State residency can hold long-term implications in terms of tax planning. This can ultimately impact your annual income as well as your net worth. If you plan to invest $5 million to $500 million, then the impact of high state taxes becomes even more pronounced, and if you are not careful, you could lose a significant chunk of your annual income and investment gains to taxes. To learn about this,and much more, we recommend requesting a copy of our brand new book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.
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Read on as we discuss how state residency works. We will also be answering questions like:
• How to change your state residency?
• How long does it take to change state residency?
• How to change residence to another state?
What Is State Residency?
State residency refers to the state you live in or are considered a resident of. The rules defining this vary between states. However, most states consider an individual a resident if they live in the state for reasons that are not transitory or temporary.
Normally, an individual’s domicile is considered to be their permanent place of residence. This is the place they intend to return to despite being absent from their state for a given time period. States also claim the right to tax a person’s income if they consider them a resident of that state. They typically tax on 100% of the individual’s income. The income in question can be generated from a variety of sources, such as their job and their investment portfolio.
Factors Determining State Residency
Generally, a person is taxed if they are domiciled in a state, have a home there, or have been present there for a period of 183 days or day. This is one-half of a tax year. Some other factors that are considered here include:
• Voter registration
• Whether you have a driver’s license issued in that state
• Your bank’s location
• Vehicle registration
• The location of a business owned and operated by you
• The location of your employment
• The classification of your employment (permanent or temporary)
• The location of any medical and legal professionals you work with
• The location of the school that your children attend
• Whether you are a member of a country club or a social organization in a state
Understanding these factors can help you avoid the complications of dual state residency. This type of residency occurs when you have a second or third home in a different state. You may also live in one state but engage in business activities or have business interests in a different state. In some cases, even if you sever all ties with a specific state, but are unable to establish domicile or residency in another state, then you may be subjected to dual residency.
People having dual residency must also deal with dual taxation. This can increase tax costs and is a common problem for high net worth individuals. However, you can minimize or eliminate these costs if you figure out how to change your state residency. To learn more, arrange a free appointment with the experts at Pillar Wealth Management!
How Can You Change Your Residence to Another State?
Changing your state residence can be a complicated issue. The process can also vary based on which state you are moving to. We recommend speaking to a legal advisor or a tax advisor for more details here.
For now, here’s a general overview of how to change your state residency:
Find a Place to Live
The first thing you need to do when you move to another state is finding a place to live. This can include renting or purchasing a new home. This place should be your permanent address. Remember, if you are unable to buy a home in your new state right away, you can enter into a long-term lease.
If you want to avoid dual residency, you can also consider selling the home you have in your old state. If this takes too long, you can transfer this property to your family members or any other entities.
Establish Your Domicile
The next thing you need to do is establish a legal domicile. You must do this if you plan to make the new state your primary residency. Most people establish a domicile shortly after they move into their new home. The state may require you to fill out an official document referred to as the “Declaration of Domicile.”
This document declares that your new home is your permanent address. For more information, we recommend reading the requirements for establishing a domicile in the state you are moving to.
Change Mailing Address
When you have rented or bought a new home, you need to change your mailing address with the US postal service (USPS). If you have established a new residence before moving to a new state, then you can also proceed to forward your mail to the new address as soon as you like.
If you want to start forwarding your mail, you can visit the official website of USPS and select the date for forwarding all your snail mail.
Change Address with Utility Providers
If you want to change your residence to another state, then you need to call your current utility service providers and inform them of the upcoming change in your address. You should alsoprepare a schedule for turning utilities on or off on specific dates. These include:
• Security system
• Garbage disposal
Besides this, you want to get in touch with your current insurance providers and inform them about the change in address.
Change Your IRS Address
If you’re wondering how to change residence to another state,you also want to update the Internal Revenue Service (IRS) as soon as possible. You can provide them your new address. This helps ensure that they send all tax refunds and related mail to the right address. It also minimizes the chances of you receiving your mail late.
To change your IRS address, you can fill out Form 8822. This form allows you to submit a new address.
Get Your New Driver’s License
If you plan to drive, you will also need a new driving license for the state you have moved to. If you already had a driving license in the previous state, then you easily get a new one in your current state. Be sure to do some research on the local requirements for a driving license before you go to the DMV. In most cases, you need:
• Your current driving license
• Social security card
• Proof of residency
• Any other forms of identification
You will also want to get your car registered and obtain a brand new license plate for the car.
Get Registered to Vote
When you are changing your residence to another state, you need to register yourself as a voter when you establish residency. For voter registration, you can call or pay a visit to the local town hall. A representative will provide you with additional details.
In some cases, you might also be able to register as a vote after applying for a new driving license at the local DMV.
Start Filing Taxes in the State
One of the most important prerequisites to changing your residency is to start filing tax returns in your new state. Filing your tax returns is always a tedious process. However, when you move to another state, it only gets more complicated.
You can consider speaking to a tax advisor or an accountant to make sure you are filing your taxes correctly for the first year. This will help you transition more quickly.
If you are preparing to invest $5 million to $500 million in liquid assets, then you will also need to see how your investments influence your tax filings. To learn more, we recommend requesting a copy of our book on Investment Management, Tax Planning, Estate Planning, and Financial Planning for High Net worth Families.
At Pillar Wealth Management, we provide comprehensive tax minimization services, among other things. Our wealth managers can help you control your capital gains taxes to increase your returns. This can have a significant impact on your portfolio performance. To learn more, read our guide on how you can enhance the performance of your investment portfolio.
Update Your Bank Accounts
When you are moving to a new state, you might also need to open a new bank account in that state. Make sure you update all your bank account information. This includes the billing addresses for your credit cards too. If you want to avoid dual residency, you should also avoid retaining any bank accounts in your previous state.
If you have a safety deposit box in your previous bank, you should move it to a bank in your new state.
Get Your Pet Registered
If you have a pet, you might need to get them registered in the new state. You should purchase a license for your pet within a month after you move to the new state. This helps make sure there are no delays in any vaccines and shots they need to receive. You can also check other specific requirements for getting your pet registered after you have moved.
Revise Estate Planning Documents
Finally, you want to revise the estate planning documents you have. This includes your Last Will and Testament, Living Will, Power of Attorney, Healthcare Directives, Advance Care Directives, etc. The documents should list your new state. You should also use new forms specific to your state.
To learn more about estate planning, speak to the experts at Pillar Wealth Management!
Other Things to Keep In Mind
Besides the requirements mentioned above, you can also do the following:
• Get a library card in the state you have moved to
• Reach out to local medical professionals and send them your medical records
• Change your social clubs and service clubs and find new ones in your new state
How Long Does It Take to Change State Residency?
As mentioned earlier, most states have a 183-day rule for changing state residency. Therefore, even if you complete all the steps mentioned above, the state may still require you to spend a minimum of 183 days to claim residency for income tax purposes.
How Can Pillar Wealth Management Help?
Pillar Wealth Management specializes in tax minimization, estate planning, portfolio design, risk management, and other areas pertaining to wealth management. Our team works diligently to help you avoid the hassles of high taxes. We utilize various strategies to ensure cost control. If you are planning to buy a new home in a different state, we can help you figure out how this can impact your tax returns. We can help you minimize the impact of your investments on your capital gains taxes and help you achieve financial serenity.
We can also help you keep an eye on unprecedented risks and keep a close eye on your investments at all times. If you are interested in learning about this, we suggest ordering a copy of our hardcover book, The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies for Families, Worth $25 million to $500 million.
State residency can be a complicated issue. Before you move to a new state, make sure you know everything regarding how to change residence to another state and how long does it take to change state residency. Knowing the state-specific requirements for establishing residency can save you a lot of time, money, and energy.
If you are a high net worth person ready to invest $5 million to $500 million in financial assets, then you can also talk to a wealth manager at Pillar Wealth Management. We can help you figure out how your new residency may impact your tax costs.
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