When tax time rolls around, smart citizens look to get their ducks in a row, so to speak. Federal tax liability tends to be easy. Most tax advice is geared toward helping people sort out the federal system, and many employers make this easy. The more interesting and complex questions revolve around the state tax system. Namely, where do you pay and how much do you owe? Because some states levy an income tax while others do not, figuring out your residency for state income tax purposes can be an important proposition. What if you’re in school? What if you live half the year in one place or another? Here’s how to determine your state of residency.
Subjective indicators of resident status
There is no hard and fast way to register as a resident of a state for tax purposes. What this means, then, is that you need to assess various indicators to determine where you will be considered a resident.
The first important factor is where you’ve registered to vote. Assume for a moment that you are a student studying history in Texas. Your parents live back home in South Carolina, and you’re enjoying life in Austin. You aren’t quite sure what the future holds, but you think you may trade in a love for pulled pork for the fine brisket of the Lonestar State. With this in mind, you registered to vote in Texas. This will be used as a primary indicator of your intent to establish domicile in Texas.
Where you happen to live for most of the year is another chief consideration when determining your residency for tax purposes. While it is still possible to be a resident of another state even if you spent ten months in Texas, your presence in Texas for that period of time will be taken as one of the subjective factors in determining how you should file your state taxes. Other important factors include where you have your mail sent, who issued your driver’s license and any evidence of an attempt to put down long-term roots.
You’ll have to make a determination based upon the combination of all of these factors. Your own subjective intent is important here, too. If you moved to a place with the intention of staying there, then you are likely a resident of that state for tax purposes. If you behave in a way that makes clear you are just there for a short period of time, then you may be a resident of a different state.
Filing non-resident tax returns
If you happened to work a summer job in Maine while living most of the year in New York, you are likely a resident of New York for tax purposes, but you will need to fill a non-resident return in Maine for the money you made there. Where you earned the money is a critical factor in determining where you pay taxes and where you must file when tax time rolls around.
You should know also that it’s possible to be a part-time resident of multiple states during a given year. If you were a resident of South Carolina who decided in August that it was time to move to Georgia, then you could be deemed a resident of both. The subjective intent factors laid out above would be used to determine your status if you intended to actually make a permanent move.