State and Local Tax Reminder about State Income Tax Residency

At DUGGAN BERTSCH, LLC, we are often asked by clients to explain the process by which a taxpayer can establish a “new” state residency for income tax purposes. 

Sometimes we are asked to explain the impact of moving to a new state altogether  or about the impact of remaining in your current state of residence while spending significant amounts of time in another or several other states. 

The situations are many – you decide to move to a new state for a new career opportunity.  Perhaps you are moving due to retirement.  Often, you are not moving, but your career has resulted in your working in multiple states sometimes including your current state of residency.  The law across the nation is varied as states apply their own statutory tests and various regulations. 

Generally speaking, there are factors that help to support a claim that a new state residency has been established.  Factors considered by Illinois are emblematic of those considered by departments of revenue and include: 

  • “location of spouse and dependents;
  • voter registration;
  • automobile registration or driver's license;
  • filing an income tax return as a resident of another state;
  • home ownership or rental agreements;
  • the permanent or temporary nature of work assignments in a state;
  • location of professional licenses;
  • location of medical professionals,
  • other healthcare providers,
  • accountants and attorneys;
  • club and/or organizational memberships and participation;
  • and telephone and/or other utility usage over a duration of time.”[1]

Moreover and arguably more important, it is the actions taken in your state of existing residency that can determine you residency obligations. 

For instance, a person can only have one domicile –  as an example in Illinois “[d]omicile has been defined as the place where an individual has his or her true, fixed, permanent home and principal establishment, the place to which he or she intends to return whenever absent.” [2]  

Let’s assume you spend a great amount of time outside your existing state.  You may even rent or purchase real estate or register a car, or join a club in a new state.  Using a definition like the one noted from Illinois, a state can assert that you remain a resident of your initial state of residency and seek to require that you pay state income taxes as a resident.  Actions taken in the existing state are arguably as, or possibly more, important than those taken in the new state(s) of residency.  This is a point often glossed over when analyzing these matters.

Whether you are planning to move to another state or want to discuss the income tax ramifications or residing and/or having employment in multiple states, please free to contact us to discuss state income tax residency.

If you have questions,  please do not hesitate to contact Michael H. Israel, MA, JD, LL.M, of Duggan Bertsch, LLC to discuss how these state taxation issues may impact you and/or your business.

This update is intended for marketing purposes and for education purposes. It is not intended to and does not create, an attorney client relationship with the reader

[1] Illinois Department of Revenue Regulations, Title 86 Part 100 Section 100.3020 Resident (IITA Section 301) g.
[2] Illinois Department of Revenue Regulations, Title 86 Part 100 Section 100.3020 Resident (IITA Section 301) d.

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