Kooky question?  Maybe.  But I know someone who did it.

First, a little background.  In the ‘70s, as RVs became more popular, these semi-nomads needed a way to receive mail.  For the next 30 years or so, the solution remained pretty simple: they hired a mail service, and periodically called them to let them know where to forward their latest batch of snail mail.

Today, people are less fixed than ever before to a specific city and state.  Beyond the millions of RVers, there are people who live on boats, people who telecommute, people who move every few months for work (e.g. travel nurses).  There are snowbirds and ski bums and seasonal business owners.

And then there are self-employed real estate investors, who can theoretically live, work and invest anywhere, and move around throughout the year if they like.

Private mail services have expanded and evolved to keep pace with today’s more mobile population.  Not only do they provide a physical mailing address for you, many will now scan the envelopes you receive and upload them to your online account.  You select which pieces of mail you want opened and scanned electronically, which ones you want physically forwarded, and which can be shredded.

This creates an opportunity for anyone who spends time in multiple states throughout the year.  If you’re not stuck in one state all year, and that state charges high taxes, why remain a legal resident?  You don’t need to own real estate in Florida or Texas to enjoy their tax-free status.  (Here’s the full list of states with no income tax.)

Now, before you go signing up, there are some things you should know.  If you have a full-time job that requires you to be in a fixed place year-round, your home state will not let you pretend you’re not there.  They will know, because they have all kinds of creepy tricks to know where you are, from tracking your vehicle movements on EZ-Pass to mobile phone GPS data to credit card transactions.

High-tax states in particular have started automatically checking these sorts of location signals when people move their residency out of state.  Massachusetts used automated data (such as EZ-Pass records) to track former residents’ movements and automatically trigger audits, resulting in a spike in audits over the last four years.

If you earn a decent living and live in a high-tax state, there’s a chance you’ll be audited when you try to move your residency out of state.  That chance rises exponentially if you leave a trail of electronic records showing that you still spend a lot of time in your old state.

Minnesota even tried to pass a “snowbird law” that anyone in the state for more than 60 days/year (rather than more than 183 days/year) would be subject to Minnesota state taxes.  The initiative failed, but the Minnesota government continues to aggressively audit part-time residents (see the recent Minnesota Supreme Court ruling).

As an interesting aside, Minnesota lost $6.45 billion in taxable incomes to residents fleeing the state and moving elsewhere, between 1992-2014.  Guess where most of those fleeing residents moved?  Nearly half moved to tax-free Florida, another quarter moved to low-tax Arizona, and the bulk of the rest went to tax-free Texas.

Still, if you can stay out of a high-tax state for more than six months out of the year, you can probably claim residency in another state of your choosing.

Landlord Change ResidencyWhat Do I Need?

To change your residency to a new state, you’ll obviously need a mailing address through a mail service there (my friend recommended St. Brendan’s Isle in Florida).  But in some cases you’ll also need an honest-to-goodness residential address as your “permanent residence address”.  In Florida, this is the case unless you register a vehicle there.  This could be a family member’s address, however.

You will need to jump through the bureaucratic hoops associated with moving to a new state: getting a new driver’s license (no test required in most cases), changing your mailing address with the US Postal Service, registering to vote.  Register your vehicle.  Get a library card.  Pass Go, collect $200.

If that sounds like more work than you feel like doing, that’s understandable.  But my friend did it over the course of a long weekend, during which she spent an hour and a half on administrative tasks, and the rest of the trip enjoying the sights of St. Augustine, Florida.

As for just how much state income taxes cost you, the number may be higher than you think.  In some states they are upward of 10% of your income – for a median US income of $67,521, that’s over $6,700/year in state income taxes alone.

I can think of other ways I’d spend or invest $6,700 each year.  Can you?

Pay a huge amount in state and local taxes? What are your techniques for minimizing them? Ever used a private mail service? Spill the beans!

 

 

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