Moving for Lower Taxes? Don’t Make This Mistake First

Moving for Lower Taxes? What Retirees Need to Know

Introduction

For many retirees and high earners, moving for lower taxes has become an increasingly common strategy. But financial planners say where you live — and how you prove it — matters just as much as where you move.

What Changed, Who’s Affected and Why It Matters

Households eyeing a move to cut taxes are running into a reality check: where you live — and how you prove it — matters as much as where you go.

Financial planners say the surge in relocation questions, especially from high-tax states, reflects a simple goal. People want to keep more of what they’ve earned. But the rules governing state taxes, residency and domicile are anything but simple.

“States tax income differently,” said Jeff Levine, chief planning officer at Focus Partners Wealth, in a recent discussion with financial journalist Robert Powell. “And domicile — where you intend to make your permanent home — drives a lot of the outcome.”

More households are considering moves as tax burdens, housing costs and retirement income planning come into sharper focus. Retirees, snowbirds and high earners are especially affected.

The challenge is that moving for tax reasons can trigger audits, dual residency claims and unexpected liabilities if not handled correctly.

And for many, the financial upside may be smaller than expected.

What This Means for You

A low-tax state doesn’t guarantee a lower overall tax bill

Retirement income may be taxed differently depending on location

Improper moves can lead to audits and double filing requirements

Personal priorities often outweigh tax savings

Not All Income Is Taxed the Same

One of the biggest mistakes is focusing only on state tax rates.

A state with higher headline rates may exempt key sources of retirement income, such as IRA withdrawals or Social Security. That can make it more favorable than a lower-tax state that taxes those income streams.

Powell noted that retirees need to map their income sources before deciding where to move. That includes wages, investment income and distributions.

The Property Tax Trade-Off

Even states with no income tax may offset that advantage elsewhere.

“New Hampshire has no personal income tax, but property taxes are high,” Powell said.

That trade-off can narrow — or eliminate — expected savings.

Lifestyle Can Outweigh Tax Savings

For many households, the decision isn’t driven by taxes at all.

Levine described a client who moved from New York to California, despite higher taxes, to be closer to family. The financial trade-off was secondary to quality of life.

Health care access, weather and social connections often play a larger role in retirement decisions than tax rates alone.

The Domicile Trap

At the center of most disputes is domicile — your permanent home.

States look beyond where you spend your time. They evaluate intent, using a range of factors to determine where you truly live.

That creates risk for those who maintain homes in multiple states.

“There’s a false notion that spending a certain number of days somewhere changes your residency,” Levine said.

It doesn’t.

Why Partial Moves Trigger Audits

The cleanest move is a complete one.

Sell your home. Relocate your belongings. Establish new ties.

Anything less can invite scrutiny. States may examine:

Where you receive medical care
Where you bank and store valuables
Where your family and pets are located

In one case, domicile shifted only after a taxpayer moved his dog, a detail that helped demonstrate intent.

Snowbirds Face Added Complexity

Retirees who split time between states — often called snowbirds — face higher risks.

They must show that their preferred state is their primary residence. That requires consistent documentation and behavior.

Failing to do so can result in both states claiming residency.

High-Tax States Are Stepping Up Enforcement

States with higher tax rates have more at stake.

California and New York are known for aggressive residency audits, particularly when high-income households leave. The goal is straightforward: protect tax revenue.

That makes careful planning essential.

When to Seek Professional Help

Given the stakes, advisers often recommend working with a CPA or attorney experienced in state residency rules.

These professionals can help build the documentation needed to support a move and reduce the risk of disputes.