Changing Your Tax Residency Requires More Than a Change of Address

Where you live continues to play a meaningful role in how much you pay in taxes — and in how confidently you can plan for major life and liquidity events. High tax states such as California, New York, New Jersey, and Connecticut remain aggressive in defending their tax bases, while lower tax states continue to attract wealthy individuals and families with the flexibility to relocate. For individuals anticipating retirement, a business sale, or another significant taxable event, changing tax domicile can be a powerful planning tool — but only if it is done carefully and correctly.

In 2026, state tax policy remains fluid. Several states are actively exploring new revenue measures aimed at high net worth individuals, reinforcing the importance of proactive, well documented residency planning rather than last minute moves.

Why a Domicile Change Requires Careful Planning

Changing your tax residency involves far more than filing a change of address. States evaluate both intent and behavior, often years after a move, and audits can be intrusive and time consuming. Before making a relocation decision, it is important to evaluate:

The impact on your family and lifestyle – Proximity to family, healthcare, travel access, schools, and community ties.

The full tax picture – Income, capital gains, estate or inheritance taxes, property taxes, sales taxes, and local levies.

Your broader wealth plan – Trust structures, asset protection strategies, business interests, and charitable planning may all need to be updated to reflect your new state’s laws.

The most successful domicile changes are coordinated well in advance and aligned with long term personal and financial goals.

Understanding Domicile and Statutory Residency

For state tax purposes, residency is generally established in one of two ways:

• Domicile is your true, fixed, and permanent home — the place you intend to return to whenever you are away.
• Statutory residency is triggered in many states if you maintain a home there and spend 183 days or more in the state during the year, regardless of your stated domicile.

Once established, domicile continues until you both abandon the former state and affirmatively establish a new permanent home elsewhere. Spending too much time in your former state — or maintaining significant ongoing ties to a church or synagogue, for example — can undermine an otherwise legitimate move.

Establishing (and Defending) a New Domicile

States focus on patterns of behavior, not just the number of days spent in a locale. Successfully changing domicile typically requires consistent evidence across several dimensions. Here are some primary and secondary factors.

Primary (Lifestyle) Factors

• Purchasing or leasing and occupying a residence in the new state
• Relocating a spouse and children under the age of 18, and family pets
• Moving personal possessions of significance
• Establishing social, civic, religious, and professional connections
• Reducing business and personal activity in the former state

Secondary (Administrative) Factors

• Updating driver’s licenses, voter registration, and vehicle registrations
• Changing mailing addresses for financial institutions and tax filings
• Updating estate planning documents to comply with the new
  state’s laws

Equally important is terminating your prior domicile. States often challenge residency changes when taxpayers appear to maintain “two lives.” Demonstrating a clear shift — spending materially more time in the new state than anywhere else — is critical.

Timing Matters — Especially Around Liquidity Events

In 2026, states continue to aggressively pursue taxes tied to business sales, IPOs, stock options, and deferred compensation. Even after a move, a former state may assert that income was earned while you were still a resident. This is even more significant in states that start the part-year return with federal income.

As a result, it is often advisable to complete a domicile change in the tax year before a major taxable event. This reduces the risk of sourcing disputes and strengthens your position if audited.

California Spotlight: The Proposed Billionaire Tax Act

California remains a focal point for residency scrutiny. Looking ahead to November 2026, a proposed Billionaire Tax Act may appear on the statewide ballot. While details remain subject to change, proposals under discussion would impose additional taxes on billionaires, potentially including wealth-based or exit-style components. Even in its proposed form, the measure has heightened attention on California residency audits and long-term presence in the state. For individuals with substantial wealth, concentrated equity positions, or upcoming liquidity events, this uncertainty underscores the importance of early planning and defensible documentation when considering a domicile change away from California.

Making the Move with Confidence

Where you choose to live is one of the most consequential intersections of family, lifestyle, and wealth planning. As state tax policies continue to evolve in 2026, the value of professional guidance cannot be overstated. Coordinating with your Pitcairn advisor and qualified local advisors can help ensure your domicile change is well planned, well timed, and well documented, so that wherever you call home, your wealth plan continues to support your long-term goals.

*********

Pitfalls to Avoid

• Don’t initiate a move without fully considering all financial and lifestyle implications.
• Don’t go it alone. Changing tax residency is a complex process that affects multiple aspects of your wealth plan. Experienced professional guidance can help you avoid pitfalls.
• Don’t assume that no state income tax always means a lower total tax bill. Every state has to pay its bills. Get help to assess the entire tax picture.
• Don’t spend 183 days or more in a state other than your declared domicile.
• Don’t mistime your move. A liquidity event, maturing stock options, or other sources of taxable income may require careful timing for your change of residency.
• Don’t apply for any tax rebates or property tax relief in your prior state if they are contingent on residency.
• Don’t retain membership in any organization in your previous state for which residency is a requirement.