Excerpt from a letter to my sister recently when they had the same idea...
ďWe have also looked for a tax friendly state where we might have a primary residence and leave this for our second home. I have been looking at that for a couple of years now and itís a lot more complicated than I initially thought. I worked alongside an income tax auditor for the State of Montana who regularly did residency audits and some of the things she told me kind of scared me. She talked about even looking at peoples cell phone records to tell where they were most of the time, and at their refrigerator contents, gym memberships, etc. I also ran into an entire field of law I didnít even know existed. ďResidency Tax PlanningĒ. I got a lot of valuable information from a Palm Springs Law firm you might take a look at:
They have a lot of articles about this. Worth a look. I didnít even know I probably need someone like them to validate my plan. I donít even know whether there is anyone like them in Montana. Iím still looking.
I also found it was difficult to determine how much actual savings we would get by moving even after being in the tax business here for the last 20 years. States have so many ways of taxing us that arenít obvious. Sales tax, property tax, vehicle tax, estate tax, exemptions on certain retirement income or not, use tax, utility costs, and cost of living differences. Iíve found it nearly impossible to determine how much I would actually be saving after all that, commuting costs, and costs of maintaining two separate homes. So we are still here and likely will be for a while. Iím probably going to pay Montana a good chunk of money as we do Roth IRA conversions over the next 6 years, but its still cheaper for us at this point than moving and trying to juggle two homes, or running afoul of one or more tax auditors.Ē