How to leave Utah residency?

Leaving Utah residency involves more than just moving. Utah’s residency laws are crucial for determining your tax obligations, eligibility for state benefits, and educational opportunities. Whether you’re relocating for work, seeking lower taxes, or going back to school elsewhere, understanding the rules is important. 

This guide will walk you through the key steps to sever ties with Utah, establish a new domicile, and manage any ongoing obligations like Utah-sourced income.

Step 1: Understanding Utah residency and domicile laws

Utah has specific rules to determine whether you’re a resident for tax purposes or not. These laws are important because they dictate whether you’re liable to pay Utah taxes on your worldwide income. Here’s how residency and domicile are determined:

1) Definitions of residency and domicile

• Residency: If you live in Utah for more than 183 days in a tax year, the state generally classifies you as a resident for tax purposes.
• Domicile: Your domicile is your permanent home. You can only have one domicile at a time, even if you own homes in multiple states. This is where you plan to return to after any absences.

2) Tests for Utah domicile

• Test 1: You are domiciled in Utah if you or your spouse claims a child tax credit for a dependent attending a Utah public school or you’re enrolled as a resident student at a Utah university.
• Test 2: There’s a presumption of domicile if you or your spouse claims a residential property tax exemption, voted in Utah, or filed a Utah income tax return.
• Test 3: If you maintain significant ties to Utah, like listing a Utah address on tax forms or having a permanent home in the state, you might still be considered domiciled.

3) Non-domicile conditions

You are not domiciled in Utah if you’ve been absent for 761 consecutive days without returning for more than 30 days in a year and have no ties such as dependents in Utah schools or property claims.

Step 2: Establish a new domicile

Once you’ve made the decision to leave Utah, you need to establish your new domicile in another state. Simply moving isn’t enough—you’ll need to take specific steps to show that your new state is your permanent home. 

Here’s what to do:

1) Establish new residency

• Secure a residential address: Find a place to live in your new state, whether it’s through renting or buying a home. Many states, like Florida, offer tax benefits such as the homestead exemption, which could help lower your property taxes. Setting up a permanent residence in your new state is essential to proving that you’ve left Utah.

• 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

The more time you spend in your new state, the stronger your case for establishing residency. Try to avoid spending too much time in Utah after the move to ensure that Utah no longer considers you a resident.

4) Transfer IDs and vehicle registrations

Make sure to transfer your driver’s license and vehicle registration to your new state. This is a clear sign that your new state is now your permanent home.

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 Utah 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

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 Utah doesn’t withhold state income taxes after your move.

Step 3: Sever ties with Utah

Once you’ve established your new domicile, it’s essential to cut all significant ties with Utah. This ensures that the state no longer considers you a resident for tax purposes or other legal obligations. 

Here’s how to sever those ties:

1) Close Utah financial ties

• Close local bank accounts: If you have any Utah-based bank accounts or financial assets, consider closing or transferring them to banks in your new state. This shows that your financial life is now centered in your new state, not Utah.
• 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 Utah, selling or leasing it out on a long-term basis is a strong sign that you’ve left the state permanently. If leasing, a long-term lease agreement is preferable, as it helps demonstrate that you no longer consider Utah your primary residence.

3) Cancel local subscriptions/services

If you have memberships or subscriptions tied to Utah, such as gyms, clubs, or local services, canceling these will help reduce your ties to the state. Holding onto these services may suggest you still maintain a presence in Utah.

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 4: Time spent outside Utah

To avoid being taxed as a resident in Utah, it’s important to manage the amount of time you spend in the state. Like many other states, Utah uses the 183-day rule to determine residency for tax purposes.

183-day rule

• What is the 183-day rule?: If you spend 183 days or more in Utah 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 Utah 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 Utah 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 Utah. Having a detailed log of your movements will be helpful if Utah’s Department of Revenue ever audits your residency status.

Step 5: Utah-sourced income

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

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

1) Ongoing tax responsibilities

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

2) Rental or business income

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