States and Taxes - Changing your state tax base

There are major tax differences from state to state, varying from no state income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming) to those with limited taxes (New Hampshire and Tennessee tax only interest and dividends) to low (Illinois and Pennsylvania tax at 3% or so) to very high (California, Vermont and Rhode Island are all over 9%).

As such, many taxpayers wish to move out of high tax states and into states with little or no state income taxes (the differences can result in a savings of thousands of dollars per year). Please be aware, however, that the IRS tax return will look the same in the new state, as federal tax law applies to all 50 states.

Here are a few tips if you are looking to change your state tax base:

- Sell current personal residence and move.

- File state tax returns for new state showing residency there. Also, use new state’s address on returns filed with IRS.

- Change drivers licenses and voters registration cards to new state. In addition, register all vehicles in the new state to establish a nexus to this state.

- Change bank accounts to a branch in new state.

- Execute a new will or living trust using new state as current state of residence.