Do your homework when selecting where to live and work

Reducing taxes is the question on everyone’s mind. While much attention is placed at the federal level due to pending infrastructure legislation, don’t forget that state income tax can play a big role in your overall tax burden.

As working remotely has increased, people have more options where they live.  Thus, there has been an increase in the tax residency plunge.  Currently nine states have no income tax:  Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.  While no state income tax is appealing, there are also states with lower tax rates that could give them a competitive advantage for your residency over other high-tax states.

Understandably, states want to make sure they are collecting all the revenue they can to support the functions of the state government. Consequently, taxpayers must be prepared to prove legal domicile (residency).

Domicile is determined under state law and may be challenged by audits; therefore, preparation and research are key.  Establishing domicile requires numerous factors by state law, regulation, publication or ruling.  Some states consider time spent, leisure activities, clubs, family doctor, location of “near and dear” items, and even the location of the family dog.  Since these factors vary by state, it is critical to be armed with the information required by your current domicile state and your compliance with those factors.

Reducing taxes is the goal of many and could be achievable depending on which state you reside. Especially if you have the ability to work at a location of your choosing – just remember to do your homework.

Please reach out to your tax manager here at Antares Group if you are considering moving and we can guide you through the process.

Tammy C. Howell is a Manager with our Business & Tax Advisory Group. She can be reached at tch@antarescpas.com.