Do you wish to change your state residency as you are staying overseas? Don’t you know anything about it? Don’t worry! We at USTAXFiling.in are there to help you to let you know everything about state residency. In this blog, let us know in detail everything about state residency. Stay tuned to know about changing your state residency as you are moving overseas.
Your employer has offered you a chance to work abroad for an assignment that may offer you immense career growth. You are happy and ready to accept the new atmosphere. Also, proper planning related to state taxes before shifting might aid you in saving significant penalties, taxes, and interest down the road. States might continue to assess income tax returns on your across-the-globe income if they consider you are still a resident. When you change your state residency when staying abroad might aid you in planning your financial future and help you save on taxes.But how do you shift your state residency while staying overseas?
How Is State Residency for Expats Determined?
Before we talk about changing your residency of state for expats, we have to first check how residency is considered. When it comes to state residency taxation of income, the resident and domicile come into play. They consider where one might be taxed, and one’s domicile might not be where they are a resident.
Every state has an individual set of laws. For instance, let us say California CCR $17014 shows a resident that includes:
- Every person who is state domiciled who is outside the state for a transitory or temporary purpose
- Every person who is in the state for other than a transitory or temporary reason.
The COMAR or code of Maryland laws 03.04.02.01B says that: A person is a resident of Maryland if the person is domiciled in Maryland on the annual day of the financial year or if the person maintains a place of accommodation in Maryland state for more than six months of the annual financial year and is present physically in the Maryland state for more than 183 days during the financial year.
3 Simple Steps to Change Your State Residency When Moving Overseas
Step 1: Abandon Domicile in Your State of Residency
For those individuals shifting abroad, abandoning domicile is the first thing to take to shift state residency when shifting overseas. The purpose of the taxpayer is a significant element when considering domicile that should be considered with reference to all of the situations and reasons. Maryland needs, in addition to the purpose, that the taxpayer takes particular action to shift their domicile. They should be available physically and set up ties in the new domicile while severing ties with the old one.
The court considered in the Comptroller v. Lenderking, 268 Md. 613,617-618 (1973) where a taxpayer domiciled in Maryland in 1969 December left the state with no intention to return, as they did not have a new domicile until 1970, October, the taxpayer was held responsible for the payment of income taxes of Maryland in 1970 for the first ten months.
Step 2: Set up a New Domicile in the Desired State Prior to Your Shift
How does one set up a new domicile and get official residency in a new state? For instance, in Maryland state, the two most necessary eligibility criteria are where you are registered to vote and where you stay. You must set up strong ties in your new habitat for a new domicile. It also includes:
- Involvement in active business
- Where time is spent
- Use (Owned versus rented), Location, and size of residences
- Possessions or items near and dear
- Occupation of taxpayer
- Bank accounts, safe deposit box locations, auto registrations
- Other things show the purpose of the taxpayer
- Family connections that include the Location of the social, religious, and community ties and children’s school
A California state resident continues to be a resident when absent for a transitory or temporary reason. Changing residency of the state like California needs:
- Purpose of staying permanently in the new place or indefinitely, as shown by your actions
- Physically shifting to and staying in the new place
- Abandonment of your prior domicile
For an expat who leaves California, it might be tough. Also, California offers a secure harbor law for those people who leave California:
- They don’t have intangible income such as investments or stocks that exceeds $200,000
- They are not leaving California to eliminate the personal income tax
- Do not return to visit California for more than 45 days during the financial year
- It is under an employment-related contract for an uninterrupted timeline of at least 546 consecutive days
These people can be considered non-residents during their stay outside California. Also, Maryland and other areas where you have close ties might point to where you are a resident. If taxpayers cannot satisfy the secure harbor law, they might still show non-residency under any circumstances, and facts approach.
- Location of your kids, RDP/spouse
- Amount of time spent in the state of California
- Location of the banks where you maintain bank accounts
- Location of your principal residence
- The point of origination of your financial transactions
- Location of your healthcare providers dentists, doctors, medical experts, attorneys, and accountants
- State that issued your vehicle registrations, voter registration, driver’s license, and expert licenses
- The permanence of your work in California
- Location of your social ties such as social, your place of worship, country clubs, and expert associations of which you are a member
- Location of your investments and real property.
Step 3: Cut All Possible Ties After Changing Your State Residency for Expats
When changing the state residency in preparation for a move abroad, you must not forget to cut any relations with the home state that you may. Above, we mentioned California and Maryland state residency laws. Several states share the same laws when it comes to changing the residency of the state for expats. Here are a few steps that might be taken to show your purpose for termination of your residency of state. They might differ and are not exhaustive on your state:
- Shifting family overseas
- Sell or buy an old house or lease new residence overseas
- Join associations abroad
- Register to be an absentee voter
- Get a financial expert or new medical professional overseas
- Change auto registration or sell automobile
- Open foreign bank accounts or close old bank accounts
With planning, you may become successful in showing that you have broken ties with your old state of residency and proceed to create roots in your new atmosphere. This is the reason why it is necessary to change your state residency when shifting overseas.
Let USTAXFiling.in Handle Your State Taxes
USTAXFiling.in handles expat income taxes of every sort from state to federal, individual to business that include challenges with state residency while staying overseas. When you choose USTAXFiling.in for your state residency income tax, you don’t have to think about anything as we are there to guide you. We at USTAXFiling.in ensure to plan everything for you and execute in the best possible way. At USTAXFiling.in, our experts are highly knowledgeable and have all the recent updates related to state residency. So, what are you waiting for? Call USTAXFiling.in now for more updates!