How to leave Arizona residency?

Thinking of leaving Arizona for lower taxes or a new job?

You'll need to take specific steps to officially cut ties with Arizona for tax purposes.

Whether you're moving for a job, retirement, or a fresh start, following these steps will help ensure a smooth transition and avoid unnecessary taxes from Arizona.

Step 1: Establish a new domicile

The first and most important step when leaving Arizona residency is to establish a new permanent home, or domicile, in another state. This means more than just physically moving—it’s about making sure all the evidence points to your new state being your permanent residence. 

Here’s how to do it:

1) Establish new residency

• Secure a residential address: Find a place to live in your new state, whether it’s through renting or buying a home. Many states, like Florida, offer tax benefits such as the homestead exemption, which could help lower your property taxes. Setting up a permanent residence in your new state is essential to proving that you’ve left Arizona.

• File a Declaration of Domicile: Some states, like Florida, allow you to file an official document called a Declaration of Domicile to confirm your intention to make that state your permanent home.

Residency guides:

• Florida Residency Guide
• South Dakota Residency Guide
• Texas Residency Guide
• Nevada Residency Guide

2) Relocate your belongings

Moving personal items like your furniture, vehicles, and other household possessions to your new state shows that you are serious about making it your permanent home.

3) Spend time in your new state

Spend as much time as possible in your new state to make it clear that you’ve established permanent residency there. If you continue spending a lot of time in Arizona, it could make your residency status unclear for tax purposes.

4) Transfer IDs and vehicle registrations

Update your driver’s license and vehicle registration with your new state’s Department of Motor Vehicles (DMV). This is a clear sign of your intent to make the new state your permanent home.

5) Register to vote

Registering to vote in your new state is another important step in establishing residency. Don’t forget to cancel your voter registration in Arizona.

6) Update financial accounts

Notify your bank, credit card companies, and other financial institutions of your new address. Keeping all your financial documents up to date with your new residency helps confirm your move.

7) Notify your employer

Make sure your employer updates your payroll and tax withholdings to reflect your new state of residence. This prevents Arizona from withholding state income taxes from your paycheck after your move.

Step 2: Sever ties with Arizona

Once you’ve established a new domicile in another state, it’s time to cut your official ties with Arizona to ensure that you are no longer considered a resident for tax purposes. 

Here’s how you can sever your ties:

1) Close Arizona financial ties

• Close local bank accounts:  If you have any bank accounts or financial assets based in Arizona, consider closing them or transferring the funds to banks in your new state. This shows that your financial life is now centered in your new state, not Arizona.
• Cancel Arizona voter registration: Make sure you cancel your voter registration in Arizona and register to vote in your new state. Voting records are often used to determine residency.
• Update personal records: Update your address with the IRS, Social Security, and any other relevant entities. Keeping all personal and financial records in your new state helps solidify your move.

2) Sell or lease property

If you own a home or other property in Arizona, selling it is one of the clearest signals that you no longer reside in the state. If you choose to lease your property instead, consider a long-term lease to demonstrate that you don’t maintain a residence in Arizona.

3) Cancel local subscriptions/services

Make sure to cancel any memberships, utilities, or subscriptions tied to Arizona, such as gym memberships, utility services, or local organizations. Keeping these active could give the impression that you still maintain a presence in the state.

4) Transfer healthcare and insurance

Move your healthcare services and providers to your new state. Transferring these essential services further strengthens your case that your daily life is now based elsewhere.

Step 3: Time spent outside Arizona

Once you’ve established your new residency and severed ties with Arizona, it’s important to manage the time you spend in the state. Arizona uses the 183-day rule to determine whether you’re still considered a resident for tax purposes. 

183-day rule

• What is the 183-day rule?: If you spend 183 days or more in Arizona in a calendar year, you may be considered a resident for tax purposes, even if you’ve moved to another state. This means you could be liable for state income taxes.
• Stay under the 183-day limit: To avoid being taxed as a resident, make sure you spend fewer than 183 days in Arizona per year. A day counts as any part of a 24-hour period spent in the state, so even brief visits add up.

Keep detailed travel records

• Why it’s important: If your residency status is ever questioned, having detailed records of your time spent in and out of Arizona will be essential for proving that you’ve stayed under the 183-day limit.
• What to track: Save flight tickets, hotel receipts, and any other travel documents that show when you entered and left Arizona. Having a detailed log of your movements will be helpful if your residency status is ever audited by Arizona’s Department of Revenue.

Step 4: Arizona-sourced income

Even after you’ve officially left Arizona residency, you may still have tax obligations if you earn income from Arizona-based sources. 

Here’s how to handle Arizona-sourced income after your move:

1) Ongoing tax responsibilities

• File non-resident tax returns: If you continue to earn income from Arizona sources, such as rental properties or business profits, you will need to file a non-resident tax return in Arizona. This allows the state to tax only the income you earned in Arizona, not income earned in your new state of residence.
• Tax on Arizona-sourced income: Even though you are no longer a resident, Arizona still has the right to tax income generated within the state. This could include wages earned in Arizona, rental income, or profits from Arizona-based businesses.

2) Rental or business income

If you own rental property or a business in Arizona, any income generated from those sources will still be subject to Arizona state taxes. It’s important to consult with a tax professional to ensure compliance with Arizona tax laws, especially if you have complex income streams that tie back to the state.