How to leave Vermont residency?

Jameson Rader

16 Oct 2024 — 5 min read

Leaving Vermont can be an exciting change, whether you’re moving for a new job, lower taxes, or simply a change of scenery. However, Vermont has specific residency rules that can impact your tax obligations, eligibility for state benefits, and more.

Step 1: Establish a new domicile

After you have decided to leave Vermont, the next step is to establish your new permanent home—your domicile—in another state. Merely moving is insufficient; you must 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: Look for a place to live in your new state, whether you decide to rent or buy a home. Many states, like Florida, offer tax benefits such as the homestead exemption, which can help reduce your property taxes. Establishing a permanent residence in your new state is crucial to demonstrate that you have moved away from Vermont.

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, 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:

2) Relocate your belongings

Transporting your personal belongings—such as furniture, vehicles, and household items—demonstrates that your move is permanent and that you plan to reside in the new state for the 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 Vermont 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 is a clear indicator of residency. Don’t forget to cancel your voter registration in Vermont 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

Inform your employer of your new address so they can update your payroll and tax withholdings for your new state. This will ensure that Vermont does not withhold state income taxes after your move.

Step 2: Sever ties with Vermont

After establishing your new home, it’s essential to sever all significant ties with Vermont. This will help ensure that the state no longer views you as a resident for tax purposes.

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

1) Close Vermont financial ties

Close local bank accounts: If you have any bank accounts, investment accounts, or financial assets linked to Vermont, 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 Vermont, selling it is one of the most effective ways to indicate that you no longer consider Vermont your primary residence. If you’re not ready to sell, you might think about leasing the property for an extended period, which can also help demonstrate your intention to leave.

3) Cancel local subscriptions/services

Make sure to cancel any subscriptions or memberships tied to Vermont, 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 indicates that your essential services are now linked to your new residence.

Step 3: Time spent outside Vermont

To avoid being taxed as a resident in Vermont, it’s essential to manage the amount of time you spend in the state. Vermont 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 Vermont 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 Vermont 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 Vermont 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 Vermont. Having a detailed log of your movements will be helpful if your residency status is ever audited by Vermont’s Department of Revenue.

Step 4: Vermont-sourced income

Even after you have officially left Vermont residency, you may still have income associated with the state, such as rental income or business revenue. It is important to understand how to manage Vermont-sourced income to ensure compliance with state tax laws.

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

1) Ongoing tax responsibilities

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

2) Rental or business income

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