Establishing Residency in a No Income Tax State

June 13, 2022

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As a digital nomad, qualifying for the FEIE is great, but that only covers your federal taxes. While some states do have their own exemption provision, a good number of high income tax states don't provide any relief from taxes for those of us who travel full time (ahem, California).

What's a nomad to do?

There are nine states that have no income tax at all, which is the ideal situation for someone who never spends time in the states and is looking to optimize taxes. The nine zero income tax states are Alaska, Florida, Nevada, New hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you have a friend or family member in any of these states that is willing to let you use their address, that's a great option. If piggybacking off a current resident isn't an option for you, you'll need to establish your own address, and South Dakota ia by far the easiest.

South Dakota has historically catered to the RV community, and that translates nicely to the digital nomad community. In one day, you can be a South Dakota residency, free from the confines of state income taxes.

Steps to Establish South Dakota Residency 

1. Get a residential address 

No, we’re not asking you to go house hunting -  there are other ways to obtain a South Dakota address. Among the top suggestions are America’s Mailbox, a PO box through UPS, or Choosesd.
Choosesd is South Dakota born and raised, but we encourage you to research to find the best fit for you.  

2. Mail yourself something

And make it something important - a bank statement, credit card statement or other should suffice. If you’re applying for residency for more than one person, each member of your family will need a piece of mail with their name on it to establish residency. 
Don’t forget to fetch this mail before your appointment at the DMV, as you will need it for proof of residency 

3. Make an appointment at the DMV

We know going to the DMV isn’t anyone’s favorite, so help yourself out by going online to the South Dakota DMV site to schedule your appointment as soon as you know what dates you will be there. The wait for an appointment can be lengthy as they are still trying to play catch-up from pandemic restrictions.
Just like with the mail, each member of your family applying for residency will need to have a separate appointment scheduled. 

4. Spend a night

After setting up a virtual mailbox and making an appointment at the DMV, an overnight stay is mandatory. The DMV only requires a one-night visit and will ask for a printed receipt with your name to prove your stay. Make sure the address on your hotel bill is your SD address, as the DMV requires this.
Again, if it’s a family affair, each person hoping to establish residency will need something with their name on it.  

5. Head on over to the DMV 

On the day and time of your appointment, be sure to take all the below items with you.

~Passport or birth certificate (originals please, no copies)

~Current states DL, which you will be turning over to a South Dakotan 

~The piece of mail with your name on it

~A receipt proving mail service agreement 

~The receipt verifying your overnight stay 

~Documentation with your social security number, such as your social security card, social security 1099 form, or a W-2

~Notarized residency affidavit, which you will complete at the South Dakota DMV

*Also, if you have ever changed your legal name, you will need copies of all marriage licenses, divorce decrees, or adoption certificates. 

Not really a fan of being a resident of South Dakota?  There are other options as well. Another RV Program, Escapees, offers mailbox and residency services in Texas and Florida.

Keep in mind that it's super important to cut ties with your old residency state. The big 6 are:
1. Surrendering you old driver's licence and getting a driver's license in your new state

2. Registering to vote in your new state

3. Changing all vehicle registrations to your new state

4. Deregistering from any state run insurance programs

5. Establishing doctors and dentists in your new state

6. Changing your address with your employer (and everyone else)

Previously, moving your banks to your new state was also important, but with online banking these days, it's not exactly necessary, unless you're at a state run credit union.

If you have any other questions after reading this blog, please feel free to reach out and schedule an appointment.