Our clients come to us from all 50 states, and internationally, so the question How do I establish residency in Nevada? comes up frequently.
But, because so many of our clients who buy Las Vegas Luxury Homes , move here from California, we specifically get the question;
How do I change my residency from California to Nevada?
The easy answer is to take these three steps. Becoming a Nevada resident is not difficult.
- Get an established residential address. See Proof of Identity and Residency
- Obtain your Nevada drivers license. See Nevada DMV New Resident Guide
- Register your vehicles in Nevada. See Nevada DMV Vehicle Registration Page
However, sometimes things can get complicated. For example, people with multi-state income streams, people with properties in multiple states, and those moving here for tax purposes should really consult their CPA or financial advisor for professional advice. The state you’re leaving might not want to let go of you so easily.
It’s Also important to know the answer to this question;
What is the difference between domicile and residency?
Fortunately, our friends at JMG Financial Group, providers of comprehensive and customized wealth management services for high net worth individuals and families since 1984, gave us permission to share the following article. We hope you find it as helpful as we did.
Changing State Residency
by Tony Kozaili, Advisor
Changing state residency has continued to be a popular topic of interest, so we are sharing this article we sent last year. In today’s world, it is more and more common to relocate on either a temporary or permanent basis. Residency audits are on the rise and states are increasingly challenging former residents who attempt to change their domicile to another state.
Knowing an individual’s state of residency is crucial. Any state in which the individual may reside has the right to tax that individual on all income earned. If residency is triggered in multiple states at once, total income may be subject to double taxation.
Domicile Vs. Residence
The terms “domicile” and “residence” are often used interchangeably, but from a tax perspective, they are not the same. In a state that imposes a personal income tax on the income of its residents, an individual is considered to be a “resident” if the individual is “domiciled” in the state or if the individual meets the conditions of a statutory residency test.
Generally, an individual is domiciled in a state if the individual intends the state to be his or her permanent home. Such intent is evidenced by such factors as (1) Primary residence, (2) the state of an individual’s driver’s license, (3) the state in which an individual has registered to vote, (4) the individual’s employment in the state, and (5) the individual’s family and social connections in the state. Such facts and circumstances apply to a domicile state like Illinois.
In many states, an individual is a statutory resident if the individual maintains a permanent place of abode in the state and spends in the aggregate more than 183 days during the year in the state. Although state rules vary in what constitutes a permanent place of abode, a state generally regards a dwelling place that is continually maintained by an individual, whether or not owned by such an individual a permanent place of abode. An individual’s second home or vacation home could meet the definition of a permanent place of abode. As for the “more than 183 days” rule of the statutory resident test that many states follow, states generally treat an individual’s presence for any portion of a day as a full day for purposes of the day count. It is recommended that individuals who maintain a permanent place of abode in a non-domiciliary state maintain a calendar to track their days of presence in such state.
Some states do not apply the “more than 183 days” test in determining whether an individual who is domiciled in another state should be taxed as a resident. California, for instance, treats an individual as a resident for personal income tax purposes if the individual is physically present in California for a purpose other than “a temporary or transitory purpose”.
An individual treated as a resident in both the individual’s state of domicile and state of statutory residency will be subject to tax on all sources of income that such states subject to a personal income tax. While states generally provide a credit for taxes paid to other jurisdictions, the allowance of such credit in dual-resident situations may be limited.
Individuals working from a second home or vacation home in a state other than their state of domicile could be exposed to double taxation on their income if the requirements for statutory residency are met. It is recommended that individuals that have been working from a state other than their state of domicile seek tax advice to prevent any adverse state tax implications.
Steps to Change in Domicile
A State’s determination of a person’s domicile is a question of fact, there is no single fact or detail to prove intent. However, intent is proven through a cumulative review of an individual’s actions over time. Taking the following steps in the state in which one hopes to make their new domicile can be very helpful:
- Selling home in old domicile state
- Business activity in the new state
- Filing taxes as a Resident
- Filing a “Declaration of Domicile” if the state has such procedure (i.e. Florida)
- Registering to vote, and voting
- Getting a new driver’s license and passport
- Registering an automobile
- Applying for Homestead exemption in new state and rescinding it in old state
- Changing mailing address and forwarding mail to the new domicile
- Updating estate plan documents (Trust, will…etc.)
- Update bank account and credit cards information
- Rent a safe-deposit box in a bank in the new state
- Using doctors, dentists, lawyers, and accountants
- Switching gym and club memberships
- Joining a new house of worship
- Making charitable donations to local organizations
- Consider updating funeral arrangements to the new state
- Notifying family and friends of the move
Traps and Possible Pitfalls
- Avoid the January 1st trap when changing state domicile. It makes things easy for income tax purposes (no partial- year resident return and non-resident return). However, it may raise a red flag with state auditors since virtually nobody moves on January 1st.
- Income sourcing is often based on the type of income. For example, supplemental income (bonus, options, restricted stock units etc.) are sourced based on prior year(s) of service. With that in mind, despite establishing a new domicile an individual may still have income tax trailing obligations to his or her old domicile state.
- If you are a beneficiary, grantor, or trustee of a trust, changing residency may impact the state taxation of the trust. State definitions of a resident trust vary widely and can present some traps. Some state definitions are based on the trustee’s location, others on that of the grantor or of the beneficiary. This lack of uniformity in definitions of residency could lead a trust to be double taxed.
Given the complex nature of changing residency or potentially having dual-residency, seeking proper planning is critical. Please reach out to your JMG advisor for more information.
You should not assume that any discussion or information contained in this writing serves as the receipt of, or as a substitute for, personalized advice from JMG Financial Group, Ltd. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. JMG is neither a law firm nor a certified public accounting firm and no portion of the content provided in this writing should be construed as legal or accounting advice. Due to various factors, including changing state rules and regulations, the content may no longer be reflective of current opinions or positions. A copy of JMG’s current written disclosure statement discussing advisory services and fees is available for review upon request
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