How to leave Ohio residency?
Leaving Ohio residency can offer plenty of benefits, especially if you’re moving to a state with lower taxes or better weather. Ohio has an income tax system that taxes residents on their worldwide income, and for some, relocating to states like Florida or Texas, which have no state income tax, can lead to big savings.
But moving to a new state isn’t just about finding a new place to live—you also need to make sure you’re following the right steps to officially cut ties with Ohio. Ohio has specific rules, like the “contact period” rule, which tracks how often you spend time in the state.
If you spend too many “contact periods” in Ohio, you might still be considered a resident for tax purposes, even if you’ve moved elsewhere.
Step 1: Establish a new domicile
The first thing you’ll need to do when leaving Ohio residency is set up a new permanent home in another state. This doesn’t just mean physically moving but also taking steps to show that you intend to live there long-term. Here’s how to get started:
1) Establish new residency
- Secure a residential address: The first step is finding a place to live in your new state. Whether you’re renting or buying, this is the foundation for your new residency. Some states, like Florida, offer tax benefits such as the homestead exemption, which can save you money on property taxes.
- File a Declaration of Domicile: Some states, like Florida, allow you to file an official document called a Declaration of Domicile to prove that you intend to make this new state your permanent home. This is especially helpful if you’re moving from a state with significant tax obligations, like Ohio.
Residency guides:
2) Relocate your belongings
Move your personal belongings to your new home in the state. This helps show that your move is permanent, as you are transferring your life to a new location.
3) Spend time in your new state
The more time you spend in your new state, the easier it will be to prove that it’s your true home. Try to minimize how much time you spend in Ohio during this period to avoid being taxed there. Remember, Ohio has specific rules on how much time you can spend in the state without being considered a resident for tax purposes (more on that later!).
4) Transfer IDs and vehicle registrations
Update your driver’s license and vehicle registration as soon as possible. States often view these documents as major proof of your intent to live there permanently.
5) Register to vote
Registering to vote is a big indicator of residency. It shows that you’re committed to participating in your new community and intend to make the state your permanent home.
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
Make sure your employer updates your payroll and tax withholdings to reflect your new state of residency. This ensures that you won’t be subject to Ohio state taxes going forward.
Step 2: Sever ties with Ohio
Once you’ve established a new domicile, it’s crucial to cut all significant ties with Ohio to ensure that the state no longer considers you a resident for tax purposes. Here are the steps to sever those ties effectively:
1) Close Ohio financial ties
- Close local bank accounts: If you have Ohio-based bank accounts, consider closing them and transferring your funds to banks in your new state. This demonstrates that your financial life is now rooted in your new home.
- Cancel Ohio voter registration: Make sure you cancel your voter registration in Ohio 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 property in Ohio, selling it is one of the clearest ways to show that you no longer reside in the state. Alternatively, leasing the property on a long-term basis can also demonstrate that you don’t maintain significant ties to Ohio.
3) Cancel local subscriptions/services
Make sure to cancel memberships, subscriptions, and services tied to Ohio, such as gym memberships, utility services, and local clubs. Maintaining these services could suggest that you’re still tied to the state, so transferring or canceling them is best.
4) Transfer healthcare and insurance
Updating your healthcare providers and transferring your health insurance to your new state is another important step. This helps solidify your move and indicates that your day-to-day life is now based elsewhere.
Step 3: Time spent outside Ohio
To ensure that Ohio no longer considers you a resident for tax purposes, it’s important to limit the time you spend in the state. Ohio uses the “contact period” rule, which helps determine your residency based on how often you spend time in Ohio. Here’s what you need to know:
212 contact period rule
What is a “contact period”?
Ohio defines a “contact period” as spending a portion of two consecutive days in the state. For example, if you arrive in Ohio on a Monday and leave on Tuesday, this counts as one contact period. However, if you’re in Ohio on Monday and Wednesday but not on Tuesday, it doesn’t count as a contact period.
212 contact period limit
You can spend up to 212 contact periods in Ohio within a tax year without being considered a resident for tax purposes. This limit allows some flexibility for individuals who frequently travel between states but don’t want to establish Ohio residency.
Example: If you live in Florida and spend a portion of Monday and Tuesday in Ohio, it counts as one contact period. But if you spend time in Ohio on Monday and Wednesday (without Tuesday), it does not count as a contact period.
Keep detailed travel records
It’s essential to track the time you spend in Ohio to stay under the 212 contact period limit. Keep documentation like flight tickets, hotel receipts, or any other travel-related proof that shows your time spent outside Ohio.
If the Ohio Department of Taxation ever questions your residency, having detailed records of your travel will help you prove that you’ve stayed under the limit and don’t meet Ohio’s residency requirements for tax purposes.
Step 4: Ohio-sourced income
Even after you’ve left Ohio residency, you may still have tax responsibilities for income earned within the state.
Here’s how to manage ongoing obligations for Ohio-sourced income:
1) Ongoing tax responsibilities
If you continue to earn income from Ohio, such as rental income, business profits, or wages, you’ll need to file a non-resident Ohio tax return. This ensures you only pay taxes on the income sourced from Ohio, while your income from other states remains separate.
2) Rental or business income
If you own rental property or a business in Ohio, any income generated from those sources will still be subject to Ohio state taxes. It’s important to consult with a tax professional to ensure compliance with Ohio tax laws, especially if you have complex income streams that tie back to the state.