Can You Choose Your State of Domicile?

July 31, 2015


What is Domicile?


Your domicile is the state where you maintain your legal residence. Contrary to popular belief, your domicile is determined by intent, rather than by the length of time you spend in a state. You may establish a state as your domicile the first moment you occupy property there, provided your intent is to return there if you go away. You have only one domicile, although you may have more than one home.


Your domicile is not formally registered anywhere, but if you want to change it, you should be prepared to convince the authorities of any state which may be negatively affected by your change of intent.

Why is your domicile important?


Your domicile is important because it affects your liability for state income taxes, your eligibility for certain state benefits, such as in-state tuition rates at public colleges and universities, disability benefits, and Medicaid benefits, and the jurisdiction where your will is probated.


Determining your domicile


You should meet the following requirements to claim a state as your domicile:


  • You must be physically present in the state, although you don't have to be present for any particular length of time. In theory, only a few minutes would suffice. In practice, however, if your residency status is ever challenged in court, you might need to prove that you were in the state for an extended period of time.

  • You must intend to make that state your permanent home.


There is one exception to the physical presence requirement. If you marry a person domiciled in another state, you may be able to claim your spouse's state of domicile as your own, even if you've never set foot there.


In order to prove your intent, It isn't mandatory to do any of the following in order to claim a state as your domicile. However, you might want to do some or all of them to prove that you intend to make that state your domicile:


  • Own property, preferably a residence larger than other residences you may own in other states

  • Relocate items of significant sentimental value to you

  • Establish ties to the local community, including operating a business

  • Register to vote

  • Obtain a driver's license


Changing your domicile


There are only two requirements to change your domicile: (1) you must be physically present in that state, and (2) you must intend to make it your permanent home. In order to prove your intent, you may also want to take some or all of the actions mentioned above. The most important point to remember when claiming a state as your domicile is that you should be consistent. Tell everyone you live in the state of your domicile, don't say, "Well, I'm in Florida 6 months and New York 6 months". 


Tax considerations


Your income may be taxed in your state of domicile or the state where you earned it, or both, though most states give a credit for taxes you pay to other states.  Most states with income tax require you pay tax to them for any real estate profits in their state, regardless of your domicile.

If both your present and former states of domicile tax income and if you move on any day other than the first of January, you'll have to file part-year returns in both states for the year of your move.


Your choice of domicile can affect state death taxes


At your death, if your state of domicile is unclear and more than one choice is available, your personal representative should take into account the effect of domicile on state death taxes. State tax laws vary with different exemption amounts, tax rates, etc. A wise choice of domicile may minimize your state death tax liability.


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