Millennials Moving Out of State: Taxes, Insurance & More

3 best out-of-state moving tips

Moving out of state

The son of a long-time client contacted me after deciding a job opportunity turned out to be a great opportunity. Meet my composite 25-year-old client Tyler who is making the move:

Tyler headed to Texas in early spring when an interesting job came up. Not sure how it would work out, he moved in with a buddy. But within a couple of months, this former rodeo bull rider knew he was staying in Texas. Tyler and his family are long-time clients and I was happy when his parents came by and said Tyler would contact me. He had questions.

Luckily, Tyler’s parents taught him basic lifestyle responsibilities. The toddler game of putting dirty socks in the laundry basket, for example, later earned him serious adulting status! The list of 20 puts doing your own laundry at #6, with the first five all involving money. On the more serious side, Tyler and his family had known and worked with me since he was a youngster, and I was confident Tyler would make good, solid choices.

1. Establish residency in the new state

Many states require that residents spend at least 183 days or more to claim they live there for income tax purposes. Simply changing your driver’s license and opening a bank account in another state isn’t enough. You’ll need to actually live there to claim residency for tax purposes. Why? Several U.S. states do not require that residents pay income taxes. These states include Florida, New Hampshire, Alaska, Nevada, South Dakota, Texas, Washington, Wyoming, and Tennessee.

Tyler would pay Arkansas taxes on his Texas income if residency wasn’t established before tax season, so he was anxious to begin the process. One of the MOST important reasons to establish residency is to stay under the radar of the IRS. Don’t wave red flags. The IRS pays attention!

How to establish residency

1. Find a place to live. Uncle Sam knows you can’t live in a P. O. Box, so you must have a physical address and a document verifying you live there. TIP: Some states require an official “Declaration of Domicile” document declaring that your new residence is your permanent home. Renters or homeowner’s insurance? On the list, too.
2.  Change your address and have mail forwarded. USPS.com makes it easy. Contact your insurance and financial providers, banks and other entities that need immediate notification of your move. TIP: Make sure Proof of Residency requirements for the state’s Real ID driver’s license shows your physical address.
3. Submit updated W-4 to your new employer when you find your own place to live and update your information with the IRS as soon as possible. The latest IRS Form 8822 allows you to submit your new address at any time.  TIP: IRS Form 8822-B changes your business address and was updated in January 2019. No option is provided for on-line submission.
4. Bring your pet and pick a vet! Don’t have a pet? You might want to consider it!
5. Let your family and friends know you moved! Sounds like common sense, but often easy to forget. Consider sending parents, aunts, uncles, favorite long-time neighbors a card and give them your physical and mailing addresses.
6. Register to vote. Learn more about new your community and participate in things that interest you.
7. Get a library card. What?? Libraries offer online services, provide community meeting rooms, are air-conditioned, and offer a quiet, calm environment. Many also have great little coffee shops, too. And they’re generally super-clean!

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2. Get Health Insurance

Generally, if you’re on your parents’ health insurance plan you can stay on that plan until you turn 26 under the Affordable Care Act.  Prior to turning 26, you receive notification that you will be terminated when you turn 26, although states may have different “coverage-through-dates.” There are three general options.

If your parent’s plan is an employer-sponsored group plan you will be offered COBRA.  This would be the same plan you currently have with an administrative fee attached of 2% if the employer has more than 20 employees and up to 10% if the employer has under20 employees.

If you are on an individual/family plan you will be offered a choice of plans from your existing health insurance plan.

However, you’re establishing out-of-state residency

Your third choice is to find your own health insurance plan. Your new employer may be your best choice, or you may decide to carry your own policy and not limit your flexibility due to company-provided insurance. This Credit Karma link offers some ideas.

1. Get a new driver’s license

Get your driver’s license as soon as possible, and before your current one expires! Make your visit to the DMV an all-in-one stop. Register your vehicle, and get a new license plate. You can also register to vote while you’re there. If you enjoy travel, visiting our National Parks, and entering Federal Buildings, you’ll need your Real ID. Even if you don’t drive, you’ll need the non-driver version! Get more information here: Real ID driver’s license will be required by October 2020.

I recently received an “I’m all moved in, Thank You!” card from Tyler. You can be certain I was as proud as any Mom could ever be.