How to leave Montana residency?

Leaving Montana residency can be an exciting change, whether you're relocating for a new job, seeking lower taxes, or simply wanting a change of scenery. Montana has specific residency rules that can impact your tax obligations, eligibility for state benefits, and more.

Step 1: Establish a new domicile

Once you’ve decided to leave Montana, the next step is to set up your new permanent home—your domicile—in another state. Simply moving isn’t enough; you must take concrete steps to make your new state your official residence. 

Here’s how to do that:

1) Establish new residency

• Secure a residential address: Find housing in your new state, either by renting or buying a home. Many states, such as Florida, offer tax benefits like the homestead exemption, which can help reduce your property taxes. Establishing a permanent residence in your new state is important to demonstrate that you’ve officially relocated from Montana.

• File a Declaration of Domicile: Some states, such as Florida, allow you to file a Declaration of Domicile, which is a legal document confirming your intent 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 your personal belongings—like furniture, vehicles, and household items—helps show that your move is permanent, and that you intend to live in the new state long-term.

3) Spend time in your new state

Spending significant time in your new state indicates a genuine move. Ensure that you are spending more time there than in Montana to clarify your primary residence.

4) Transfer IDs and vehicle registrations

Update your driver's license and vehicle registration to reflect your new address in your new state. This strongly indicates your intention to live there permanently.

5) Register to vote (if eligible)

Register to vote in your new state if you are eligible. Voter registration is a strong supporting indicator of residency, but it is considered together with many other facts and does not by itself determine your tax status. Do not forget to cancel your voter registration in Montana as well.

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 keep your records consistent with your new domicile.

7) Notify your employer

Notify your employer of your new address so they can update payroll and tax withholdings for your new state. This helps prevent Montana state income taxes from continuing to be withheld after your move.

Step 2: Sever ties with Montana

After establishing your new domicile, it is important to cut all significant ties with Montana. This helps reduce the risk that the state continues to consider you a resident for tax purposes.

Here are the steps you should take to sever these ties:

1) Close Montana financial ties

• Close local bank accounts: If you have any bank accounts, investment accounts, or financial assets linked to Montana, consider closing them or transferring your funds to banks in your new state. This action shows that your financial life is now centered in your new state.
• Update personal records: Inform the IRS, Social Security, insurance companies, and other relevant agencies of your new address to help make sure all personal records are updated with your new residence.

2) Sell or lease property

If you own a home or any property in Montana, selling it is one of the best ways to show that you no longer consider Montana your primary residence. If you're not ready to sell, you might consider leasing the property for an extended period, which can also help demonstrate your intention to leave.

3) Cancel local subscriptions/services

Be sure to cancel any subscriptions or memberships linked to Montana, such as gym memberships, utilities, or local services. Keeping these active may imply that you still have connections to the state.

4) Transfer healthcare and insurance

Transferring your healthcare providers and insurance to your new state shows that your essential services are now tied to your new domicile.

Step 3: Time spent outside Montana

To avoid being taxed as a resident in Montana, it is essential to manage the amount of time you spend in the state. Montana follows the 183-day rule, commonly used by many states to determine residency.

183-day rule

• What is the 183-day rule?: If you spend 183 days or more in Montana 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 in Montana, it is important to manage the amount of time you spend in the state and to end Montana domicile. Montana law treats you as a resident if you are domiciled in the state, or if you maintain a permanent place of abode in Montana and have not established a residence elsewhere. Many states also treat 183 days in a year as an important benchmark when looking at residency, so keeping your Montana days low, especially if you still have an abode there, helps support your nonresident position.

Keep detailed travel records

• What is the 183 day benchmark?: If you spend a large part of the year in Montana, especially 183 days or more, and still have significant ties or a permanent place of abode in the state, Montana may consider you a resident for tax purposes even if you claim to live elsewhere. This can make you liable for Montana income tax on your worldwide income.
• Stay well under 183 days: To strengthen your nonresident position, you should aim to spend clearly fewer than 183 days in Montana each year and to avoid maintaining a permanent place of abode there after you move. A day is generally counted when you are physically present in the state at any time during that day, so even short visits can add to your total.

Step 4: Montana-sourced income

Even after officially leaving Montana residency, you may still have some income tied to the state, such as rental or business revenue. It’s important to know how to handle Montana-sourced income to comply with state tax laws.

Here’s how to handle Montana-sourced income once you’ve moved:

1) Ongoing tax responsibilities

• File non-resident tax returns:  If you continue to earn income from sources within Montana, such as rental properties or businesses, you must file non resident tax returns. These returns are structured so that Montana taxes only the income you earned within the state and not the income from your new home state.
• Tax on Montana-sourced income: Even though you are no longer a resident, Montana still has the right to tax income generated within the state. This could include wages earned in Montana, rental income, or profits from Montana-based businesses.

2) Rental or business income

If you own a rental property or a business in Montana, any income you earn from these sources is subject to Montana state taxes. It’s crucial to consult a tax professional to ensure compliance with Montana tax laws, especially if you have complex income streams connected to the state.