How to leave Arkansas residency?
Thinking about leaving Arkansas and moving to a new state? Whether you’re chasing better job opportunities, looking to retire in a tax-friendly state, or simply want a change of scenery, understanding how to officially change your residency is key to avoiding unnecessary taxes.
Arkansas has specific rules and regulations for determining if you’re still considered a resident, so it’s important to follow the right steps to make sure you’re no longer on the hook for Arkansas taxes.
This guide will walk you through everything you need to know—from establishing a new home in another state to cutting ties with Arkansas, and even how to handle any ongoing tax responsibilities for Arkansas-based income.
Steps to leaving Arkansas residency
Step 1: Establish a new domicile
Leaving Arkansas residency starts by setting up a new home and making it clear that your new state is your permanent residence. This involves more than just moving; you need to show your intent to stay there for the long term.
Here’s how to do it:
1) Establish new residency
- Secure a residential address: One of the first steps is getting a place to live in your new state. Renting or buying a home shows that you’re serious about establishing residency. States like Florida even offer tax benefits, like the homestead exemption, which can save homeowners on property taxes.
- File a Declaration of Domicile: In states like Florida, you can file a legal document stating that your new state is now your permanent home, making it official.
Residency guides:
2) Relocate your belongings
Moving your personal items to your new home, like furniture, vehicles, and other essentials, is a solid indicator that you’ve moved for good.
3) Spend time in your new state
To strengthen your case, spend as much time as possible in your new state. If you’re constantly back and forth to Arkansas, it might raise red flags with tax authorities, so try to limit your time there.
4) Transfer IDs and vehicle registrations
Make sure to update your driver’s license and vehicle registration to your new state. This is a strong signal that your primary residence is no longer in Arkansas.
5) Register to vote
Registering to vote is another great way to show your commitment to your new state. Voting records are one of the key factors that tax authorities look at when determining residency.
6) Update financial accounts
Notify your banks, credit card companies, and other financial institutions about your new address. This ensures all your official documents and accounts reflect your new residency.
7) Notify your employer
Ensure that your employer updates your payroll and tax withholdings to reflect your new state of residence. This will prevent Arkansas from taxing your income.
Step 2: Sever ties with Arkansas
Once you’ve established your new domicile, the next important step is to cut any remaining ties with Arkansas. This helps ensure that the state no longer considers you a resident for tax purposes.
Here’s what you need to do:
1) Close Arkansas financial ties
- Close local bank accounts: If you have any Arkansas-based bank accounts, it’s a good idea to close them or transfer your funds to a bank in your new state. This shows that your financial activity is now rooted in your new residence.
- Cancel Arkansas voter registration: Register to vote in your new state and cancel your voter registration in Arkansas. Voting is a clear indicator of where you live, and states often use this information to verify 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 property in Arkansas, selling or leasing it out can help demonstrate that you no longer plan to live there. Long-term leases show you don’t have personal access to the property, which helps prove you’ve moved.
3) Cancel local subscriptions/services
Cancel or transfer any Arkansas-based services, like gym memberships or utility services, to your new state. Keeping them active may suggest you still have ties to Arkansas.
4) Transfer healthcare and insurance
Finding new healthcare providers in your new state and updating your health insurance information can be another clear indicator that your life is now based elsewhere. Be sure to also update auto and home insurance policies to your new location.
Step 3: Time spent outside Arkansas
To successfully leave Arkansas residency, it’s important to limit the amount of time you spend in the state after your move. Arkansas uses the 183-day rule to determine whether someone is still considered a resident for tax purposes.
Here’s how to ensure that you aren’t classified as a Arkansas resident:
183-day rule
- Stay under 183 days: Arkansas’s tax authorities consider you a resident if you spend 183 days or more in the state during a calendar year. To avoid being classified as a resident, you should spend fewer than 183 days in Arkansas each year. This includes any visits back to Arkansas, so plan your travel carefully.
- Maintain travel records: It’s crucial to maintain detailed records of your time spent outside Arkansas, such as flight tickets, hotel receipts, or any other documents that can prove you were not in the state. These records will be useful if tax authorities ever question your residency.
Step 4: Arkansas-sourced income
Even after you’ve left Arkansas residency, you may still have ongoing tax responsibilities if you’re earning income from sources within the state. Here’s how to manage that:
1) Ongoing tax responsibilities
If you continue to earn income from Arkansas (such as rental income, business profits, or wages), you’ll need to file non-resident tax returns. Non-resident tax returns ensure that only income earned from Arkansas sources is taxed, while the rest of your income remains untaxed by Arkansas.
2) Rental or business income
If you own rental properties or businesses in Arkansas, the income generated will continue to be subject to Arkansas taxes, even after you establish residency elsewhere. Be sure to work with a tax professional to handle the complexities of filing and ensuring you meet all of your tax obligations.
Arkansas’s residency tests
Arkansas uses three main tests to determine residency for income tax purposes, as outlined in Individual Income Tax Regulation 2.26-51-102(9):
1) Domicile test
Arkansas will still consider you a resident if you maintain your domicile in the state. Simply moving out temporarily does not automatically change your residency. You must establish a new permanent home in another state to sever this tie and demonstrate your intent to stay there.
2) Day count test
If you have a permanent residence in Arkansas and spend more than six months (183 days) in the state, you will be considered a resident. Temporary stays don’t count as a permanent place of abode.
3) Factors consideration test
Arkansas tax authorities evaluate several factors to determine if you’ve cut ties with the state, including:
- The address you use on federal tax returns and official documents.
- Your voter registration and driver’s license location.
- Where your immediate family lives.
- Community ties, memberships, and other affiliations with Arkansas.
