How to leave Montana residency?

Jameson Rader

Oct 16, 2024 — 5 min read

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.

SavvyNomad provides residential addresses in Florida, which can be a valuable service for individuals who need an official address while transitioning to a new domicile. This is especially useful for digital nomads and expats looking for tax benefits in a state like Florida.

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:

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

Registering to vote in your new state is a clear indicator of residency. Don’t 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 confirm your move.

7) Notify your employer

Notify your employer of your new address to update payroll and tax withholdings for your new state. This will ensure that Montana does not withhold state income taxes after your move.

Step 2: Sever ties with Montana

After establishing your new domicile, it’s crucial to cut all significant ties with Montana. This will help ensure that the state no longer considers 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 ensure 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, you’ll want to make sure you spend fewer than 183 days in Montana each year. A day counts as any part of a 24-hour period spent in the state, so even short visits can add to your total.

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 Montana 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 Montana. Having a detailed log of your movements will be helpful if your residency status is ever audited by Montana’s Department of Revenue.

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. This process ensures that Montana only taxes 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.