What Constitutes Residency for Taxes?

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Determining residency for taxes is more than a matter of where you own property. To determine if you should pay tax in a jurisdiction, consider where most of your life's activities are conducted. If you are registered to vote in a place where you also hold memberships, received a driver's license and pay health insurance, the government will often designate that state as your primary residence where taxes should be levied and paid.

Define Domicile

Many individuals attempt to take advantage of income-tax free states by claiming residency in those places. To avoid the scrutiny of government taxation officials, you must establish your domicile, or legal home, as soon as you determine your new residency. A domicile is your legal home, where you have a true, fixed and permanent home and principal establishment, and to which whenever you are absent you have the intention of returning. To establish a domicile, you typically register your vehicles and obtain a driver's license in your new location, purchase property and register to vote.

Assess Your Income Activities

Taxation officials determine residency status through charts that designate how much money an individual can earn before consideration as a resident. For example, California's Franchise Tax Board states that an individual head of household younger than age 65 cannot earn more than $19,704 before being considered a taxable state resident. All states have different maximum income allowances. If you are earning money in multiple states, consult with a certified tax preparer to help determine where you might owe income tax.

Show Your Intent

Owning a piece of property in a state doesn't make you a resident; your actions do. If you own property in an income-tax free state where you also claim residency, government officials will assess whether or not you are using your property as a way to avoid paying income tax. As the taxpayer, it's up to you to prove your intent to become a resident of your tax-free state by demonstrating that you live in your home the majority of any given year and are building new ties to the area by conducting activities with local institutions, such as banks and insurance companies. The same methods establish a domicile also applies to renters.

Resident and Non-Resident Aliens

A foreign person visiting the U.S. can be considered a resident for tax purposes starting the day of his arrival in the country. Non-native resident and non-resident aliens who are not foreign athletes, teachers, students or government-related officials must pay income tax, but each group is subject to varying levels of income tax based on a "substantial presence test.” The test states that a foreigner is a taxable resident if he is in the U.S. at least 31 days during the current year and 183 days during the three-year period, which includes the current year and the two years immediately before that.