How Do I Change My Residence?

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by on November 5, 2010 at 7:06 pm

Should I move to a no-tax State

This is one of my favorites. It’s certainly something that’s worth considering. But it isn’t necessarily cut and dry. There are additional factors you should consider.

Moving Issues

  1. Do I want to move? Honestly this plays a big part. If you’re going to pick up and move for the sole purpose of tax benefits, it may well be a short lived venture.
  2. What is the cost of living where I’m moving to? Property taxes, transportation, utilities and such can suppress the tax benefit derived from moving.
  3. What is my current state tax burden? Ask your tax advisor to explain your current and projected recognized state income.

When Does Changing Residence Make The Most Sense?

I would say a target area for moving would be someone who is a New York City Resident. They are paying both State and City income taxes. My personal issue with this is if you’re shipping out, you’re not enjoying the benefits of being a city resident year round. You’re paying a premium. Half of the year you’re standing watch.

Other States such as California and Maine have aggressive tax rates (especially for Upper Middle Class earners). A residence change could eliminate an aggressive tax burden. In dollars and cents a mariner earning $120,000 could save upwards of $10,000 annually if they move from a high tax State to a tax free State.

More Fuel For The Fire

Family considerations will be a factor as well. Do you live in a State where your kids will receive tuition discounts for college if they are in State residents? Do they receive better consideration for admission? Where does your spouse work? Will this fit into the equation? Are you considering transitioning to a shore side position in the future? How is the job market in the State you are considering moving to?

Drivers License To Prove Residence?

Stay away from snake oil salesmen! Residence is uniquely defined by each State individually. But there’s one common trait. You need to RESIDE in the State in order to be a Resident. Not to be all inclusive – here are some factors considered

  1. When you get off of the vessel, where do you go first?
  2. Where do you own property?
  3. Where have you signed leases?
  4. Where is your family and ties?
  5. Where are your bank accounts, management accounts?
  6. Where are you registered to vote?
  7. Where are your vehicles insured?
  8. Where do you spend your time when you’re not working?

Not an absolute list. But it gives an idea. If your prior State comes looking asserting you are still a resident, the burden is on you to demonstrate otherwise. With the poor economy, States are feeling the blow as well. They are less likely to be agreeable with uncertainty.

Moderation is generally a good approach. Before leaping to another State of residence, examine the benefits. Be sure to see if there are actions you can take in your current State of residence to lower the tax burden. In some cases, moving 1 mile within the same State can save thousands.

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