The definition of “residency” is different for tax purposes. When you are a resident of a state, you are subject to the laws and jurisdiction of that state. Not only do you get the benefits offered by the state, you are also subject to the conditions set by them.
Due to the fact that one can obtain state-funded benefits as a resident, each state is restrictive in determining how you can become a resident. Several factors will help to establish your residency in a state:
- Changing your driver license issued by the state.
- Having a home address in that state.
- Having a voting location in that state.
- Having all your bills, bank statements, utilities, etc all going to that state.
Each state has its own rules around who’s domiciled in the state. Domicile means a fixed, permanent, and principal home that you reside in and that you intend to return to or remain in.
Definition of Establishing Residency in a State
To establish residency in a state, the first thing to do is to have a resident address in that state and can be a rented or purchased home.
Once you have an address, you can begin to update your mailing address for your bills, statements, etc. You would also be setting up utilities (electricity, water, gas, internet, phone) at your new resident home. All this is needed before you can apply for a new state ID.
Obtaining a state ID, be it a driver license or normal state ID, is one formal way to proof that you are residing in that state. This is because the DMV requires you to provide proof of residency in that state when you apply for an ID for the first time in that state. The DMV will usually ask you to provide at least two documents for this. Some examples of acceptable documents are:
- Rental or lease agreement with the signature of the owner/landlord and the tenant/resident.
- Deed or title to residential real property
- Mortgage bill
- Home utility bills (including cellular phone)
- Medical documents
- Employee documents
For a comprehensive list of acceptable documents, please visit the state’s DMV website.
Is Having a Mailbox Address Sufficient For Establishing Residency?
While a mailbox account in the state helps with having an address in the state and can get all your bills over to the state, it is not sufficient to establish. To do so, you still need to provide some sort of proof that you have a place to live there.
A good option of getting proof of address with a residential address is TruResidence.
Once you have established residency, then using a mailbox address to maintain presence in the state will be much easier and is allowed. This is the case with many expats where they moved to another country for years but still maintain their link with the state at home.
Overall, you should consult a tax lawyer or CPA to determine the laws that govern this if you are looking to move out of your current state.
Are there other options people use for residency?
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Friends and family address option: you can use your family or friends address as your permanent address. However, they will have to be committed to opening your mail and sharing the details of its contents on your behalf. This means that they will have to reach out to you most days, which can be a burden. They may also forget to tell you about an important letter or package, which could cost you extra late fees or cause compliance issues if you run a remote business. Privacy may also be a concern because you have to trust your family or friend as they read and open all your mail and packages. For example, your bank statement arrives and you may not want that to be seen. Not a great solution as your permanent address or receiving your mail.
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PO Box: there are limitations if you are an LLC, you can’t use a PO box as your principal business address. A PO box only receives mail delivered through USPS and not other couriers such as FedEx or UPS. This will limit the types of mail you can receive and may cause you to purchase an additional mailbox service. You must travel to the physical location of your PO box and be conscious of not letting it overflow with mail and packages. In fact, your PO box may be closed if it overflows often. If a piece of mail or package is too large to fit in your personal mailbox, a carrier might leave the package at your front door or lobby area, which is a security risk for you. The US Postal Service gives the recipient a limited number of business days to pick up a package before it is returned to the sender. This creates problems when you are away or unable to travel to your PO box. USPS also states “if the item requires a signature, a notice will be left. If the second attempt is unsuccessful, the item will be returned to the sender after the required number of business days have elapsed.” It’s also worth knowing that in some cases, the senders of technological products will not deliver their products to a PO box address. If this is a fit for you feel free to check out the 3 ways to get a PO Box.
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Virtual mailbox: a virtual mailbox is a service that allows you to access and read your mail online from anywhere in the world as long as you have an internet connection and device. Think of it as similar to email. With a virtual mailbox, you can have a truly permanent address. Let your virtual mailbox notify you about your personal and business bills in real-time, so you don’t miss a payment, invoice, or taxes! Your virtual mailbox will automatically save you time by digitizing your mail. You can check out the full ultimate guide to a virtual mailbox.
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TruResidence: this is a unique and new home address solution. Establish your primary place of residence in the U.S. by leasing an upscale home address in a prestigious condominium tower. Obtain a lease agreement to help you open and maintain personal accounts. You can learn more here.