Many states have significantly increased their state income tax in recent years; meanwhile, seven states do not have a state income tax. As a result of this divergence, more taxpayers are becoming interested in possibly changing their tax residency.

While a change in residency may appear to be a straightforward endeavor, there is no bright line test to guarantee that a taxpayer will be taxed as a resident of the state of his choosing. Instead, changes in residency are evaluated based on a taxpayer’s specific facts and circumstances. Additionally, states have become aggressive in challenging residency changes to avoid losing out on tax revenue.

This paper reviews the residency rules for individuals, identifies steps to establish new residency, and addresses residency audits. It also provides an overview of the residency rules for trusts.