How to leave Rhode Island residency?

Moving away from Rhode Island can be an exciting opportunity, whether you’re relocating for a new job, seeking lower taxes, or simply looking for a change of scenery. However, Rhode Island 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 Rhode Island, the next step is to establish your new permanent home—your domicile—in another state. Just moving isn’t sufficient; you need to take specific actions to make your new state your official residence.

Here’s how to do that:

1) Establish new residency

• Secure a residential address: Find a place to live in your new state, whether 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 crucial for demonstrating that you have left Rhode Island.

• File a Declaration of Domicile: Some states, like Florida, allow you to file a Declaration of Domicile, a legal document that confirms your intent to make the new 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 shows you’ve made a real move. Make sure you’re spending more time there than in Rhode Island to avoid any confusion about where your primary residence is.

4) Transfer IDs and vehicle registrations

Update your driver’s license and vehicle registration to reflect your new address in your new state. This is a strong indicator of your intent to live there permanently.

5) Register to vote

Registering to vote in your new state clearly indicates residency. Also, remember to cancel your voter registration in Rhode Island.

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

Let your employer know about your new address so they can update your payroll and tax withholdings to your new state. This will help make sure Rhode Island doesn’t withhold state income taxes after your move.

Step 2: Sever ties with Rhode Island

After establishing your new residence, it’s essential to sever all significant ties with Rhode Island. 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 Rhode Island financial ties

• Close local bank accounts: If you have any bank accounts, investment accounts, or financial assets linked to Rhode Island, 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: Notify the IRS, Social Security, insurance companies, and other relevant agencies of your new address to ensure all personal records reflect your new residence.

2) Sell or lease property

If you own a home or any other property in Rhode Island, selling it is one of the strongest ways to show that you no longer consider Rhode Island your primary residence. If you’re not ready to sell, consider leasing the property out for an extended period, which can also help demonstrate your intent to leave.

3) Cancel local subscriptions/services

Make sure to cancel any subscriptions or memberships tied to Rhode Island, such as gym memberships, utilities, or local services. Keeping these active could suggest that you still have ties 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 Rhode Island

To avoid being taxed as a resident of Rhode Island, it’s important to manage how much time you spend in the state. Rhode Island employs the 183-day rule, which is 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 Rhode Island 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 Rhode Island 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 Rhode Island 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 Rhode Island. Having a detailed log of your movements will be helpful if your residency status is ever audited by Rhode Island’s Department of Revenue.

Step 4: Rhode Island-sourced income

Even if you've officially ended your residency in Rhode Island, you might still have some income associated with the state, such as rental income or business revenue. It's essential to understand how to manage Rhode Island-sourced income to ensure compliance with state tax laws.

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

1) Ongoing tax responsibilities

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

2) Rental or business income

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