Which US state should I set up residency in?

I’m trying to decide which US state to set up residence in.

This is a complicated question. For one thing, deciding where you want to reside depends on things like:

  • Income Tax (None in FL, TX, NV, WA, SD, TN (excpt dvnds)
  • Sales Tax (especially for vehicles)
  • Property Tax
  • Health Insurance rules for those who aren’t in-state much

And requirements like:

  • How long do you have to be in-state?
  • How often do you have to renew Driver’s License and Registration?
  • Can you get out of jury duty because you’re gone?

RVers have been doing this for a while:

And there are some new complications:

The Patriot Act now requires that financial institutions have a residential address on file for each of their customers, and it explicitly excludes the use of mail forwarding addresses for this purpose.

So I wanted to start a thread that gathers some good information on how people make this decision, problems they’ve had, and things they’ve learned.

For me it might make sense to stay in FL because it’s tax-free, I have the license already, and they have no in-state requirement. But I have no family or real address there if it’s ever required, and I don’t see myself owning land there because it’s too far from a major airport.

Nevada or TX makes sense if I’m going to buy some land and stay in the winters–both are by good airports and have strong tech communities.

Maybe folks want to contribute to a spreadsheet that has some of this data filled in? Or we can keep it in this thread?

For most of us that are earning right now, the short list is probably the states with no income tax, but there are other considerations and I want to make sure we know what we’re getting in to.

How have you all made this decision?

I started a spreadsheet for this, if you’d like to contribute:

if you qualify for the FEIE it doesn’t matter what state you’re in. My mail gets sent to my mom in Indiana. My DL is from AZ because that’s where I lived when I last owned a car. I’ve not changed it because I’ve not owned a car since 2001 (haven’t lived in AZ since then either) and it doesn’t expire until I’m 65.

I didn’t realize that this is probably true. For most people, your state of residence doesn’t matter. For California though (and maybe others), it is very difficult to move away, and the Foreign Earned Income Exemption is irrelevant. Don’t want this to take anyone by surprise. It’s a shady move on California’s Franchise Tax Board’s part and they don’t deserve extra money for it.

I don’t believe that to be true. Tax liability varies by state and not all states recognize FEIE, it’s at the federal level.

Yeah, Simple mentioned that above.

maybe you don’t want to pick a state, but the common wealth of Puerto Rico… if you are a US resident already you can go to PR for amazing tax breaks…

Sounds interesting. Have you done this? Know an article that’s a first-person account of the process? I see a lot of “Puerto Rico is a Tax Haven” summary articles, but nothing practical.

It also looks like a break on income derived from Puerto Rican sources, as well as capital gains and dividends earned after being a resident. Residents must live in the territory 50% of the year. Am I missing something useful?

Curious to hear about peoples’ experiences with Patriot Act address verification.

We’ve had residency in TX for some time now with our only address being a mail forwarding address and are starting to run into problems with our banks.

Has anyone figured out a way to get around this, or had experience dealing with financial institutions regarding the Patriot Act?

I set up a Seattle mailbox with Traveling Mailbox. It is a real address, not a PO box, so I haven’t had any issues plus WA state doesn’t have income tax or businesses or individuals. Was even able to get a drivers licenses with my mailbox.

One thing I haven’t seen mentioned is the link between state residency and business franchise fee structure. Especially if you plan to operate several businesses, this can get very expensive. From experience I know that California has things set up where it is very difficult to avoid their yearly franchise tax fees ($800 minimum) for both LLCs and Corporations, whether your entity is formed in state or out of state if you are a resident. I imagine a similar situation exists in other high tax states, but possibly even in no income tax states with high franchise fees.

Actually, Washington state has no tax on individuals but does have a tax on businesses. It is called the B&O tax which is a gross receipts tax and is the reason I chose not to form a business there.

BTW, California does have a similar deal to the FEIE which is called “safe harbor”. Major difference is they have a 546 day time window to be out of the USA vs the FEIE which operates on a 365 day window. There is also a 200K limit on intangible income which might nail you if you have lots of investments or certain royalties, etc.

I did some research on Puerto Rico and went there… I was thinking about moving there for tax reasons. If you have investments in the US it won’t really count… you’ll need investments in other parts of the world or puerto rico to get the zero tax on capital gains and dividends… and as far as income… if you are in puerto rico and most of your clients are in the US… this won’t count ( I believe… not completely sure on this one) … I know for sure if you have any form of address in the US it won’t count. Honestly… the tax incentive are huge… but living in puerto rico is not what I want to do… you can still save a lot but in a different way by going to places with low coast of living… yea, you’ll still get taxed wherever you are in the world as an American citizen… but if your cost of living is so ridiculously low it won’t matter…

Yes, I too have been receiving notices from banks recently re address verification. Quite annoying. I have been with these banks many years too - so not sure what triggered the need for new verification. They are requesting a utility bill. Causing a huge headache… likely to lose that account. Sucks that the Patriot Act is causing legitimate US citizens who pay US Federal & State taxes to lose bank accounts. We aren’t doing anything wrong but are caught up in their net. Very annoying.

Let me know how the situation progresses on your end. Curious to know your experiences as things unfold.