The Geographic Arbitrage: Tax Migration & Domicile Planning
The Geographic Arbitrage: Tax Migration & Domicile Planning
Moving from California or New York to Florida or Texas isn’t just a U-Haul trip; it’s a legal battle. How to sever your “Sticky Domicile” and survive the residency audit.
Executive Summary
- The SALT Cap Pain: High earners in states like California (13.3% top rate) or New York (10.9%+) lose massive wealth annually. Since the SALT deduction is capped at $10k, this is a pure loss. Moving to a **0% Income Tax State** (FL, TX, NV, TN, WA, WY, SD) is the equivalent of an immediate 13% raise.
- The “Sticky Domicile” Risk: States do not let rich taxpayers leave easily. California’s FTB and New York’s DTF conduct aggressive **Residency Audits**. They track cell phone towers, credit card swipes, and flight logs to prove you never “really” left.
- The Strategy (Clean Break): You cannot just “buy a condo” in Miami. You must prove you **abandoned** your old domicile. This means moving your “Teddy Bears” (items near and dear to your heart), changing doctors, moving pets, and spending <183 days in the old state.
The “Teddy Bear” Test
The Auditor’s Psychology: Auditors don’t look at where you vote; they look at where you *live*.
👉 The Rule: If you move to Texas but leave your wedding photos, expensive wine collection, family dog, and heirlooms in your California house, **you have not moved.** You are just “visiting” Texas. You must move the emotional center of gravity of your life.
Mechanic: The Severance Checklist
Simulation: High Earner Migration ($5M Annual Income)
| Test | Statutory Residency | Domicile (Intent) |
|---|---|---|
| Primary Metric | Day Count (>183 days) | “Center of Vital Interest” |
| Evidence | Flight Logs / Cell Data | Home Size, Doctors, Club Memberships |
| Outcome if Failed | Taxed as Resident | Taxed on WORLDWIDE Income |
“In the eyes of the taxman, you can have many houses, but only one ‘Home.’ The burden of proof is on you to show that your old home is now just a ‘vacation property’ and your new house is your ‘castle.'”