The Smart Mover’s Guide to State Taxes

Moving to a new state might sound as simple as hiring movers, but for tax purposes, it’s far more complex. Failing to properly cut ties with your former state can result in audits, double taxation, and serious headaches. If you’re moving mid-year or splitting time between states, the risks increase dramatically.

1. Dual Residency

Many people assume that once they move, they’re no longer subject to tax in their previous state. Unfortunately, that’s not always the case.

High-tax states like New York, California, and New Jersey may continue to consider you a resident unless you clearly and fully establish residency elsewhere and completely cut ties.

You could be taxed as a resident in your old state and a part-year or full-year resident in your new state. That means:

• Double taxation on income

• Two sets of filings

• Risk of residency audits, especially for high-income earners

2. Moving Mid-Year? You Might Owe Both States

If you move mid-year, you may have to file part-year resident returns in both states, even if you're only working in one.

Common mistakes:

• Not allocating income properly between the two states

• Forgetting that some states tax income earned while physically present even if it’s paid by an out-of-state employer

• Ignoring capital gains or bonuses paid after the move, which may be sourced to your old state

Example: A bonus received in December may be taxable in your former state if it was earned during the time you lived and worked there, even if you now live elsewhere.

3. Audit Triggers to Watch For

States are getting more aggressive in tracking and challenging residency claims. You might be audited if:

• You claim residency in a no-income-tax state like Florida or Texas

• You maintain a home in your old state

• Your W-2 or K-1 still shows your former address

• You use a former state doctor, CPA, or mailing address

• You spend significant time (often more than 183 days) in your old state

Keep a paper trail: flight records, phone logs, and credit card receipts to prove your location.

4. Common Tax Traps for Business Owners and Investors

If you own a pass-through entity (LLC, S-corp, etc.), moving states can have added layers of complexity:

• Nexus may still exist in the old state, keeping you subject to business or franchise taxes

• K-1 income may be sourced to the old state

• You may still need to file business returns in multiple states

Investors with significant capital gains or rental income should also evaluate:

• Whether gains are taxed based on the state of residence or the source

• If the rental property remains in a taxable state, you’ll owe non-resident tax

5. Checklist to Protect Yourself

• Get a new driver’s license and voter registration

• Buy or lease a home in the new state (not just a short-term rental)

• Register your car and update insurance policies

• Use healthcare providers, schools, and professionals in your new state

• Update your mailing address for every financial institution and your tax filings

• Change your estate planning documents to reflect your new domicile

• Track your days in each state, especially if you still travel back and forth

Moving can save money in the long run, especially if you're leaving a high-tax state, but only if it’s done strategically. Without proper planning, you could face audits, double taxation, or penalties.

 At Abell & Advisors, we guide individuals, families, and business owners through state transitions the right way: minimizing audit risk and maximizing tax efficiency. Reach out to make sure your move doesn’t come with financial baggage.