May 31, 2019 / by Fortis Family Office Tax Team

Establishing State of Domicile for Tax Purposes

Wealthy taxpayers have long assumed that spending a minimum of 183 days, or six months plus one day, in a residence outside a high-tax state would be sufficient to avoid taxes in that state. But advisers note that this long-held belief is not a sophisticated approach. ¹

 Keeping track of where you were, will not be enough for most taxpayers. 

When scrutinized by state authorities, courts look at the totality of circumstance and not just technical check the box type requirements for establishing residency for tax purposes. ²

State authorities will most likely investigate the following circumstances:

• Where you maintain a driver’s license and vehicle registration.
• Where you are registered to vote.
• Where you conduct business.
• Where your employer resides.
• The state where you maintain professional licenses.
• The state where you keep your “near and dear” items (Teddy Bear Test; where you leave your teddy bear, is home). ³
• The address for insurance, deeds, mortgages, leases, passport, banking statements, utility bills, federal and local tax returns.
• Receipts for everyday expenses.
• Active bank accounts/banking relationships.
• Where your children are enrolled in school.
• Where you house your pets.
• Your doctors and lawyers.
• The state of where you spend the greatest amount of time.
• The property you own (second homes/vacation homes).
• Where you declare residency for hunting or fishing licenses.
• Your memberships to organizations.
• Where you have social gatherings.

Conclusion

Keep records of your move and consider the factors state authorities look for to challenge state of domicile.  You should consult with a tax professional or adviser for help on how to obtain proof of residency.

---

¹ NYTimes.com: The Teddy Bear Test, and Other Ways to Pass a State Tax Audit

² “I want to establish Florida residency and avoid state income tax”. not so fast!

³ LATimes.com:The Teddy Bear Test and Other Challenges…

Additional Sources:
Moved to a New State? Be Prepared for a Residency Audit
So You Think You Are A Florida Resident?