Abandoning Your Current State May Take Some Work
By Kathy Zelazny
Many people who visit Jackson Hole fall in love with the spectacular scenery and wildlife that the Valley has to offer. When they find out that Wyoming is an extremely tax friendly state, with no individual or corporate income tax, no estate or gift tax, and a relatively low property tax, serious thoughts of settling down in Jackson Hole arise. Because Wyoming does not have an income tax, the Wyoming Department of Revenue does not have a formal definition of residency for tax purposes. Residency is often determined through other administrative agencies, such as Wyoming Game and Fish for the purpose of issuing hunting or fishing licenses. Therefore, establishing residency in Wyoming is easy. Where the challenge arises is in breaking ties with the state where you currently reside.
Trying to move from New York to Jackson to escape high taxes? The New York Department of Taxation and Finance will inform you that your domicile there won’t change until you can demonstrate that you have abandoned it. You can only have one domicile at a time. Domicile in New York is defined as the place where you intend to have a permanent home; where your permanent home is located; the place you intend to return to after being away (as on vacation, business assignments, educational leave or military assignment). New York considers you a resident if your domicile is New York or your domicile is not New York, but you maintain a residence there (whether you own it or not) for more than 11 months of the year and you spend 184 days or more in New York during the tax year. Those 184 days can add up quickly, as partial days count toward that total. Additionally, keep in mind that spending the night in New York counts as 2 days.
Want to get away from California’s burdensome tax system? The California Franchise Tax Board considers residency as primarily a question of fact determined by examining all of the circumstances of your particular situation. They will look at such factors as: the amount of time you spend in California versus outside of California, the location of your spouse and children, the state that issued your driver’s license, where your vehicles are registered, where you maintain professional licenses, where you’re registered to vote, the location of banks where you have accounts, the origination point of your financial transactions, the location of your doctors, dentists, accountants and attorneys, where you have social ties (place of worship, social or country clubs, etc.), the location of your real property and investments and the permanence of your work assignments in California. Like New York, California is known to be extremely aggressive in pursuing its former residents who have moved to tax friendly states seeking relief.
It can be well worth the effort to move to Wyoming to enjoy its beauty and rugged wilderness and save big money on taxes. Just make sure you take all of the necessary steps to properly cut ties with that high tax state you’re trying to escape or you may end up carrying that tax burden to Wyoming with you.
Kathy Zelazny is an attorney practicing in both St. Helena, CA and Jackson, WY, where she is of counsel with the law firm of Mullikin, Larson and Swift LLC. Ms. Zelazny is a graduate of Duke University Law School and has her Master of Laws Degree (LL.M.) in taxation from New York University.