State Residency Issues

Sep 20, 2014

State Residency is a concept used by US states to determine whether you are liable to pay state income taxes. Your residence does not automatically end when you stop being physically present in that state. Generally, your “tax domicile” is the place you intend to make your home for a permanent or indefinite period of time meaning that it is the place to which you intend to return after temporary absences.

When determining if you have a “tax domicile”, states look at your intent to return to the state after your stay abroad, and various indices that may indicate you never planned on giving up your “tax domicile”. They look at things such as whether you have a bank account, mailing address, driving license, real estate, family members still living in that state or whether you are registered to vote in that state. Some states focus more on real estate (whether you have a place to go back to), some will no longer consider you a resident once you spend less than 6 months in that state. Yet another criterion which could be used is the “teddy bear rule”: where do you store the personal items which have a large sentimental value to you?

One strategy may be to establish a “tax domicile” in a state which does not have personal income tax before leaving the US. These include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

Short of that, you should upon moving abroad give up all state drivers licenses, bank accounts, real property, voter registration (except for Federal elections), etc.

You also want to avoid moving back to your last state of residence. If you reestablish residence in the same state, it may consider that your “tax domicile” always was in that state and it may assess back taxes for the years you spent abroad.

Specific rules

Actual rules vary by state, not only regarding the exact criterions used to determine your residence, but state tax laws also vary (they may or may not allow you to take advantage of the foreign earned income exclusion for state tax purposes).

California, New Mexico, South Carolina and Virginia have the stickiest rules – meaning that if your last residence was in one of those states you may want to take active steps to change your “tax domicile”.

You can download below the rules for a number of states. These documents may not be up to date as states may change their State Residency rules at any time. We offer it as a place to start if you are trying to determine your status with respect to one of the states listed here.






DC Business Tax info for Form D-30










Maine general info

Maine safe harbors



Minnesota (Foreign income exclusion)



North Carolina

New Jersey

New Mexico

New York






West Virginia

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