Moving to Utah

Utah taxes residents on everything and nonresidents on Utah-source income, and a resident is anyone domiciled in Utah for any part of the year. Utah Code 59-10-136 makes three facts conclusive: if you or your spouse claimed a dependent who was enrolled in a Utah public K-12 school, were enrolled as a resident student at a Utah public college, or voted in Utah without being registered elsewhere, you are domiciled in Utah for that year, full stop. Short of those, domicile is decided on the weight of sixteen listed factors, among them a Utah driver license, the primary residential property-tax exemption, where you earn your income, where your cars are registered, and whether you kept a place to live in Utah and spent 183 or more days in the state. The year you move you file a TC-40 with Schedule TC-40B, which computes the tax as though you had lived in Utah all year and then multiplies by the share of your income that belongs to Utah. The taxpayer tax credit is prorated with it, so a mover pays Utah at the full-year effective rate on the Utah share of income, usually more than a full-year resident with the same Utah income would pay.

Resident, part-year resident, nonresident

The Tax Commission puts it in one sentence: a resident is an individual “domiciled in Utah for any period during the tax year,” but only for that period. A nonresident is anyone else, and a part-year resident is both in sequence: all income during the resident months is Utah income, and only Utah-source income during the rest. Utah-source income means wages for work physically performed in Utah, income from a Utah business or partnership, and rent and gain from Utah real estate. Interest, dividends and pension payments received while a nonresident are not Utah-source, wherever the payer sits. Utah has no reciprocal agreement with any state, so a nonresident who commutes into Utah files here on the Utah wages and takes a credit on the home-state return.

Domicile: the conclusive tests and the factors

The statute works in two layers. The first layer is automatic. You are domiciled in Utah for a tax year if, during that year, you or your spouse:

• claimed a dependent for the federal child tax credit who was enrolled in a Utah public kindergarten, elementary or secondary school (a noncustodial parent divorced from or never married to the custodial parent is excepted);
• were enrolled as a resident student at a Utah state institution of higher education; or
• voted in a Utah general, municipal, primary or special election, had not registered to vote in another state, and had not voted in another state that does not require registration.

If none of those applies, the second layer asks whether you have a permanent home in Utah you intend to return to and settled here “not for a special or temporary purpose, but with the intent of making a permanent home,” decided by a preponderance of the evidence on the listed factors only: a Utah driver license; the residential exemption on a Utah home; a dependent who is a Utah resident student; the quality of your Utah living quarters compared with those elsewhere; a spouse or dependent living in Utah; where your income is earned; where your vehicles are registered; church and club memberships; a Utah address on mail, government documents or a tax return; having filed a Utah resident or part-year return; having claimed Utah residency in any court or government filing; failing to get a license the state you call home would require; maintaining a Utah abode and spending 183 or more days of the year in Utah; and having voted in Utah in any of the three prior years. No single factor decides. Several together usually do.

Spouses are tied. If your spouse is domiciled in Utah, so are you, unless you can show that for the tax year and the three years before it you owned no Utah property, spent no more than 30 days a year in Utah, earned no income for work performed in Utah, did not vote in Utah and held no Utah driver license. Couples who are legally separated, divorced, or who file federal returns as married filing separately are not treated as spouses for this purpose.

The practical reading for a mover: voting is the brightest line in both directions. Vote in Utah and you are a resident that year; register and vote in the new state and you have removed the fact Utah treats as conclusive. The second brightest is a child in a Utah public school. After that, the file is built from the driver license, the residential exemption, the cars and the calendar. The Commission notes that if you skipped filing because you believed you were not domiciled and it turns out you were, you owe the return, the tax, penalty and interest.

The part-year return: TC-40B

A part-year resident or nonresident completes the TC-40 through line 24 exactly as a full-year resident would, on the whole year’s federal AGI, then turns to Schedule TC-40B. Column B of the schedule is total income and adjustments from the federal return. Column A is the Utah portion: all income received during the resident period, plus Utah-source income received during the nonresident period. Line 39 divides column A by column B, rounded to four decimal places and capped at 1.0000. Line 41 multiplies the full-year Utah tax after credits by that ratio, and the result goes back to the TC-40 as the Utah tax.

Because the taxpayer tax credit is figured before the ratio is applied, it is figured on the full year’s income, including the months you lived elsewhere, and then prorated. A mover with a good income in both states gets a smaller credit than the Utah months alone would have earned. The nonrefundable credits on TC-40A Part 3 are also taken before proration and so are prorated too.

The credit for tax paid to another state

Utah residents and part-year residents may claim a credit, code 17 on TC-40A Part 4, computed on Form TC-40S for each other state, for income tax paid to another state on income that Utah also taxed. Nonresidents never claim it; they take the credit on their home-state return instead. The credit is the actual tax from the other state’s return, not the withholding on the W-2, limited to the Utah tax on the same income, and part-year residents prorate it to the income reported in column A of the TC-40B. Only income taxes count; sales and local taxes do not. A pass-through entity tax paid to another state counts only to the extent the underlying income is in Utah taxable income. Keep a signed copy of the other state’s return.

For the typical mover the credit does nothing, for the reason the example shows: income earned before the move is not Utah income, and income earned after it is not the former state’s. The credit matters to a full-year Utah resident who works part of the year in another state, owns rental property or a business interest there, or receives a K-1 from a partnership that files in several states.

Working across the line

Nonresidents who work in Utah. Wages for work physically performed in Utah are Utah-source income and go on a nonresident TC-40 with TC-40B, unless the 20-day exemption applies: a nonresident who worked in Utah 20 days or fewer in the year, had no other Utah income, and lives in a state that either has no income tax or exempts Utah residents in the same way need not file. The exemption is not available to professional athletes and entertainers, people paid per event, construction contractors and laborers, or certain key employees and highly paid officers. Days worked in Utah, not days present, are what count.

Remote workers. A nonresident who works from home in another state for a Utah employer is not earning Utah-source wages on those days; Utah taxes only days physically worked in Utah and has no convenience-of-the-employer rule that would treat out-of-state days as Utah days. The reverse is the one to watch: a Utah resident who works remotely for an out-of-state employer owes Utah on all of it, and may owe the other state too if that state has such a rule, with the Utah other-state credit as the only relief. Keep a day count either way.

Military. A service member keeps the home-state domicile under the Servicemembers Civil Relief Act, so active-duty pay of a nonresident stationed in Utah is not Utah income and is left out of TC-40B column A. A civilian spouse may elect the service member’s state of residence, and a nonresident military spouse’s Utah wages are subtracted on TC-40A Part 2 with code 88. A Utah-domiciled service member stationed elsewhere remains a Utah resident and the pay is taxed. The Commission’s Publication 57 covers the details.

Moving out of Utah

The year you leave, you are a part-year resident through the date domicile ends, and Utah income afterward is only Utah-source income: a Utah rental, a Utah business, wages for days worked in Utah, gain on Utah real estate. A pension paid to a former resident is not Utah-source; federal law bars any state from taxing the retirement income of someone who no longer lives there. Get the domicile facts in order before December 31: register to vote in the new state, surrender the Utah license, re-register the cars, move the children’s school enrollment, and drop the residential exemption on any Utah home you keep, since a second home does not qualify and claiming it is a listed factor. Enter the ending date on TC-40B. Expect the Commission to look hardest at people who keep a Utah house, a Utah license and a Utah dentist while filing from a state with no income tax.

Moving in: the first-year checklist

• Give the new employer a federal Form W-4; Utah has no state W-4, and Utah withholding is computed from the federal form. If you want extra Utah tax withheld, ask payroll for a flat additional amount.
• Keep the last pay stub from the former state and the first from Utah; column A of TC-40B needs income by period.
• Expect retirement income to be taxed. Pensions, IRA withdrawals and the taxable part of Social Security are Utah income from the move date, offset by the credits described in Utah for retirees. Arrange Utah withholding on the pension or plan a TC-546 prepayment, because Utah has no estimated-payment schedule and the 90% / 100% test applies on April 15.
• If you sold a home in the former state, any gain over the federal exclusion is in TC-40B column B, but goes in column A only if the sale closed after the move.
• File the former state’s part-year return too, and keep a signed copy with the Utah return in case the TC-40S ever matters.