Establishing residency in another state

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Mtbikelover

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Hi there.  My DH and I are planning to retire in a few years. We currently live in Wisconsin where the state taxes are huge. We've heard South Dakota makes it really easy for full time RVers to "relocate" to.

We aren't going to be full time.  Our plan is to go on 4-6 weeks long trips and then come back to our house for a month (see kids & other family, DH wants to do his wood working hobby, etc), then head back out for another trip and so on.  That would have us on the road more than it would in Wisconsin.

Will we legally be able to move our residency to South Dakota?  I know all the things we need to do - drivers license, address, file our taxes there, etc. and we have no problems doing it.  Just want to make sure we won't get in trouble with the IRS.

TIA!
 

Roy M

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If you buy property in SD and list it as your primary residence you would likely be subject to capital gains tax on the Wisconsin home. Would you save enough to make it worthwhile and risk a red flag with the IRS?
 

Utclmjmpr

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It isn't the IRS that will go after you, it's the states that are looking for money,, and it's the blue states that seem to be the worst.>>>D
 

johnaye

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You need to check the residency laws of WS to see how long you can be in the State to be considered a resident.  It is all about taxes.  Other than that, changing your state of residency is no big deal.
 

NY_Dutch

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It isn't the IRS that will have a problem with your plan, it's just a simple change of address for them with no difference in taxes. Wisconsin may have a problem though, if they determine your claimed SD domicile address is a mail forwarding company and you're still maintaining a residence in Wisconsin. And if you're receiving any property and/or school tax benefits such as veterans or seniors exemptions, you'll likely lose them. Health insurance may also be an issue...
 

Senator

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If you come and go to and from WI, WI is your primary residence.  You still have a house.  You still get mail there.  You go to a Dr there.  You vote there.  Your church is there.  Your bank is there.  Your family is there.  WI will want their taxes.  Of course, if you are small potatoes, they likely won't care.

Give up the house, put your kids name on it.  It doesn't matter if your stuff is in there.  That establishes a disconnect.

The IRS won't care.  You still owe them no matter where you are.

Maybe you can homestead separately?  Each spouse homesteads a different property.

 

gobama84

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Mtbikelover said:
Hi there.  My DH and I are planning to retire in a few years. We currently live in Wisconsin where the state taxes are huge. We've heard South Dakota makes it really easy for full time RVers to "relocate" to.

We aren't going to be full time.  Our plan is to go on 4-6 weeks long trips and then come back to our house for a month (see kids & other family, DH wants to do his wood working hobby, etc), then head back out for another trip and so on.  That would have us on the road more than it would in Wisconsin.

Will we legally be able to move our residency to South Dakota?  I know all the things we need to do - drivers license, address, file our taxes there, etc. and we have no problems doing it.  Just want to make sure we won't get in trouble with the IRS.

TIA!

The answer to will you be legal is NO as long as you own property in Wisconsin.
 

ArdraF

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Auditors have a series of questions they ask to determine residency and, if the answer to most questions are yes, then you are a resident of that state.  It looks like you will still be a Wisconsin resident as long as you go there for medical, church, voting, etc.  Colorado is one state that has prosecuted people who live there but claim residency in another state so it's probably not worth the hassle.  In most places you are considered a resident if your car with out-of-state plates is parked in the driveway for a specified period of time which varies by locale but is often six weeks.  Then they (the state) come after you.  Also, as someone mentioned, rules for obtaining medical insurance are strict.  As an example, when we left California we could no longer belong to Kaiser Permanente.  The person at Kaiser told me the domicile rules for them are set by Medicare even though I was not of Medicare age when we moved.  I could have emergency care in California but not regular doctor appointments which precluded me from remaining with Kaiser.

Many people try to game the system, but I would rather not be looking over my shoulder knowing that what I was doing was possibly illegal.  It's one thing to sell your home and truly "go on the road" as a full-timer but it's an entirely different thing if you're just trying to avoid paying taxes.

ArdraF
 

NY_Dutch

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gobama84 said:
The answer to will you be legal is NO as long as you own property in Wisconsin.
Welcome to the forum!

Property ownership alone is not a test of domicile or residency in a state. I own property in three states, but can only claim domicile in one.
 

Mtbikelover

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Senator said:
If you come and go to and from WI, WI is your primary residence.  You still have a house.  You still get mail there.  You go to a Dr there.  You vote there.  Your church is there.  Your bank is there.  Your family is there.  WI will want their taxes.  Of course, if you are small potatoes, they likely won't care.
Mail will go to South Dakota, bank is already in different state, doctor will be wherever we are on the road, don't go to church, we will vote in South Dakota.

We will keep the house but kids will still be living in it while they go to college or we will rent it out.  We already have 2 other rentals in another state so not sure how this will be different.  That's a good idea to put the house in their name.
 

Mtbikelover

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gobama84 said:
The answer to will you be legal is NO as long as you own property in Wisconsin.
Why? I own 2 houses in Illinois and I don't pay taxes there.  My house will be part rental property (kids may pay rent while living there as well as a possible roommate).
 

Gary RV_Wizard

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You will still pay Wisconsin and local property taxes on your Wisconsin property, and Wisconsin sales tax on anything you buy there. Plus, the IRS still collects federal income tax no matter where you reside. So the only thing that might be in doubt is Wisconsin income tax. As long as you own property there and regularly stay there, it will be near impossible to void paying Wisconsin income tax. Wisconsin law will establish who is required to pay their tax, so you need to consult a Wisconsin tax expert (lawyer or CPA) who can advise how you might sufficiently severe your ties to Wisconsin to avoid being liable for taxes. I don't think what you have descrided would achieve it, but it's a sufficiently gray area that you need professional advice, not internet hearsay.
 

zulu

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Mtbikelover said:
I own 2 houses in Illinois and I don't pay taxes there.

Hold the phone . . . you own 3 houses -- one on WI, two in IL? And you're asking an RV forum for free legal advice instead of a lawyer? Seriously.
 

Gary RV_Wizard

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Owning property doesn't automatically make you subject to state income taxes, but owning and living in it (even once in awhile) is a strong indicator that you are a "resident" for tax purposes. That's why you need professional tax advice from someone familiar with Wisconsin tax law. 

As for your Illinois property, much the same situation applies but the tax status is determined under Illinois law. Has Illinois actually decided you don't owe them taxes, or are you just "flying under the radar"? For example, if  it is rental or commercial property of some sort, Illinois probably doesn't assess income tax on the "foreign" owner.

The main thing is that you can't just tick a couple of boxes on a residency checklist, e.g. driver license and voter registration, and be sure you are free of state taxes.  All it takes is just one item that Wisconsin says makes you subject to their taxes and you are stuck. They get to make the rules and interpret them as well.
 

BernieD

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As others have said, perhaps not loudly enough, the advice that you get here is worth what you are paying for it. See a professional tax preparer, CPA or EA (enrolled agent) familiar with WI and IL taxes. From what you have said, you have been, or should have been, filing both WI and IL taxe returns. The IRS doesn't care much about what state returns you file if you file married/jointly. Residency would only affect the states. There is a difference between residency and domicile; residency can be temporary and domicile is where you intend to return. WI is also a community property state, further complicating the issue. See a professional and bring ALL of your information. This is my free first consultation (I am an EA), the next one costs you  :) .
 

Mtbikelover

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BernieD said:
As others have said, perhaps not loudly enough, the advice that you get here is worth what you are paying for it. See a professional tax preparer, CPA or EA (enrolled agent) familiar with WI and IL taxes. From what you have said, you have been, or should have been, filing both WI and IL taxe returns. The IRS doesn't care much about what state returns you file if you file married/jointly. Residency would only affect the states. There is a difference between residency and domicile; residency can be temporary and domicile is where you intend to return. WI is also a community property state, further complicating the issue. See a professional and bring ALL of your information. This is my free first consultation (I am an EA), the next one costs you  :) .
Thanks!  I took the advice given to seek professional advice and called the Wisconsin Department of Revenue directly.  They said it didn't matter if we had a house here.  As long as our drivers license is registered in South Dakota, we do not have to pay state tax.  Even if we did part time residency here (less than 6 months), we still would not have to pay taxes.  And the house can stay in our name.  We will just have to provide them a copy of our drivers license when they send a letter asking why we didn't file.

Since, at most, we would only be in the state for 3-4 months a year, we aren't trying to scam the system.
 

Gary RV_Wizard

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Good - know you know the safe answer for Wisconsin. It's usually not that simple, but Wisconsin makes it easy to comply.    I would make note of whom you spoke and the date/time, in case it ever comes into question in the future.
 

gobama84

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Mtbikelover said:
Thanks!  I took the advice given to seek professional advice and called the Wisconsin Department of Revenue directly.  They said it didn't matter if we had a house here.  As long as our drivers license is registered in South Dakota, we do not have to pay state tax.  Even if we did part time residency here (less than 6 months), we still would not have to pay taxes.  And the house can stay in our name.  We will just have to provide them a copy of our drivers license when they send a letter asking why we didn't file.

Since, at most, we would only be in the state for 3-4 months a year, we aren't trying to scam the system.

So which State can you vote in?
 

docj

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gobama84 said:
So which State can you vote in?

They would vote in SD like all the other full-timers who use the State as a domicile.  We've been voting in SD for the past ~8 years.
 
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