Moving to Texas: what Texas asks, and what the state you left will check

Texas asks three things of a new resident, and none of them is about tax. Get a Texas driver license within 90 days. Register the car within 30 days, paying a $90 new resident tax instead of the 6.25% use tax. And if you bought a house, file the homestead application with the county appraisal district, showing a Texas license with the same address. That is the whole list, and a person who does nothing else is as much a Texan as the Comptroller cares to know. The state that cares is the one left behind. A person who moves from Los Angeles to Austin stops paying California tax only when California agrees the move was real, and California, like New York, Illinois, Minnesota and New Jersey, has a definition of resident, a list of factors and auditors who apply them to people who file a final resident return and disappear to a state with no income tax. Becoming a Texan is therefore mostly a matter of ceasing to be something else, and the evidence is built for the old state’s rules.

Every taxing state uses two tests, and a mover has to pass both. The first is domicile: the one place a person treats as a permanent home and intends to return to. The second is a statutory test that catches people who keep a home in the old state and spend too many days there, whatever they call their domicile. A retiree who sells the Chicago condo, buys in New Braunfels and never looks back passes both easily. A couple who keeps the Lake Tahoe house and splits the year is the one the audit is written for.

What Texas actually requires

Two of these have teeth in Texas. The driver license address must match the homestead; an appraisal district will not grant the exemption on a license showing the old address or a different Texas address, though it may accept a backdated application once the license is fixed. And the homestead must be the owner’s principal residence, owned by an individual rather than an entity. A new resident who puts the house in an LLC for privacy or in an irrevocable trust for estate planning can lose the exemption and the cap; that is a question for the attorney before the deed is recorded, not after.

Domicile: one home and the intent to keep it

Domicile is the state a person has made a true, fixed, permanent home, and it does not change until a new one is established with the intent to abandon the old. The states agree on the definition and on the burden: the person claiming to have changed domicile must prove it, in New York and Illinois by clear and convincing evidence (verify). A person who cannot prove the change keeps the old domicile by default, and the old state keeps taxing everything.

Each state publishes what it weighs, and the lists are alike. New York’s audit guidelines name five primary factors: the home, comparing size, value and use of each residence; active business involvement; time; the location of items “near and dear,” the heirlooms, art and pets that mark where a person actually lives; and family (verify). California’s Publication 1031 uses a closest-connections test: time in each state, where the spouse and children are, the principal residence, licenses, voter registration, bank accounts, doctors, places of worship, real property and business interests (verify). Illinois presumes last year’s resident is this year’s if more days were spent in Illinois than anywhere else (verify). The pattern across all of them is that the easy steps count for little and the hard ones count for much. Changing the license and registering to vote are expected, and their absence is damaging, but their presence proves nothing. What persuades an auditor is the old house sold or rented at arm’s length, the better house in Texas, the doctors moved, the club resigned, the dog in Texas, and a calendar that shows the center of life has moved.

The statutory tests: a kept house plus a day count

The domicile test can be won and the statutory test still lost. New York and New Jersey treat a person as a resident, whatever the domicile, who keeps a permanent place of abode in the state and spends more than 183 days there; Minnesota uses 183 days and an abode suitable for year-round use (verify). California has no day count but presumes residency after nine months in the state (verify). Any part of a day is a day: landing at LaGuardia at 11 p.m. is a New York day. And the person, not the state, keeps the count; an undocumented day is scored for the old state. The common advice to “stay under 183” is therefore necessary and not sufficient. A person who keeps the New Jersey house and spends 180 days there passes the count and still has to win on domicile, and 180 days in the old house is poor evidence of having left.

The traps that keep a Texan filing elsewhere

Remote work for an employer in a convenience-rule state. New York, Delaware, Nebraska and Pennsylvania (verify) tax a nonresident’s wages for days worked at home for an in-state employer unless the employer requires the out-of-state location. A software engineer who moves from Brooklyn to Dallas and keeps the New York job files a New York nonresident return on the whole salary, with New York withholding, every year, while the rest of the household’s income is Texas’s, which is to say untaxed. Texas gives no credit because Texas charges nothing. The fix is an employer that requires the Texas location in writing, or a Texas employer.

Working across the state line. Oklahoma, Louisiana, New Mexico and Arkansas each tax nonresidents on wages earned inside their borders, and Texas has no reciprocity agreement with any of them. A Texarkana resident who works on the Arkansas side files an Arkansas nonresident return; a nurse in Wichita Falls with shifts in Lawton files in Oklahoma. In an income-tax state the home state would credit that tax. In Texas it is simply owed, which makes a job across the line worth a few percent less than the same job on the Texas side.

Gambling in Oklahoma or Louisiana. A W-2G from a casino across the line carries that state’s withholding and that state’s nonresident return. Oklahoma taxes nonresidents on Oklahoma gambling winnings (verify), and the losses that offset federally may not offset there.

The old house. Rent from it is old-state income every year. The gain on selling it after the move is old-state income too, with the federal $250,000 or $500,000 exclusion available if the owner lived in it two of the last five years. Selling before the move puts the gain on the last resident return, where it is taxed anyway; the exclusion is what matters, not the timing.

The move year on paper

The old state gets a part-year resident return for the year of the move: all income received through the move date, then only old-state-source income after it. Texas gets nothing. The federal return is unchanged. The move date should be the same on that return, the Texas license, the vehicle registration and the homestead application; a move date on the return earlier than the license date invites the question of what the person was waiting for.

Look at the state boxes on every W-2, 1099-R and SSA-1099 for that year. Employers and custodians change the state of record when the address changes, or whenever they get around to it, so the withholding box often shows the old state for the whole year. The part-year return claims back whatever the old state took after the move date, and new Forms W-4, W-4P and W-4R with no state election stop it going forward. Pensions and IRA withdrawals cannot be taxed by a former state once the person is a nonresident, under 4 U.S.C. §114, so a retiree’s exposure after the move is limited to income with an old-state source.