Choosing a Domicile State: A Guide for Nomads

By: Rootless Living Magazine Staff

A BENEFIT OF SELLING your home and traveling full time is that you get to choose your domicile state, also known as the state you have residency in. Traveling full time has become so popular that services have been established to help provide nomads with an address and a way to receive their mail.

Popular States For Nomads

The three most popular domicile states for nomads are South Dakota, Texas, and Florida. The biggest benefit to “residing” in these states is that they don’t have a state income tax. These three states aren’t the only ones that don’t collect state income tax, but they offer a few other attractive benefits as well. These are some things to keep in mind as you weigh your options.

• Vehicle registration costs: Most states provide estimates for vehicle registration on their website. Find out how much it will cost for you to register your vehicle and RV, as well as if the state requires annual inspections or smog tests. It’s a good idea to get vehicle insurance quotes as well.

• Residency requirements: This varies from state to state, with South Dakota being the easiest to get, with only a one-night stay required. Determine what each state requires, and what kind of documentation they need to prove it.

• Driver’s license renewal process: Find out how often you will need to renew your license and whether you can do it online. In addition, determine if the state requires a special driver’s license and test to drive your RV (i.e., a non-commercial Class A).

Health Insurance

Each traveler should consider their own needs to determine the best fit when it comes to health insurance. If you don’t have health insurance through your employer, you’ll need to review the plans available on the state government marketplace. Some states offer income-based subsidies, while others may not. Also, check to see if plans cover nationwide care. Finally, compare plan benefits, premium prices, deductibles, and copays to find the plan that best meets your needs.

Owning A Business

If you own your own business, there are a few additional things you’ll need to consider before choosing which state will be your domicile. Most small business owners report their business income on their personal income tax return. This includes freelancers, independent contractors, and anyone who owns a sole proprietorship, such as an LLC, S corp, or partnership.

It’s easiest to register your business in the same state that you choose to be your domicile state. However, there are certain rules you have to follow regarding where your business is registered. For example, if your business has a physical location, you must register your business in the state where that brick and mortar building is located.

It’s also important to consider tax policies when it comes to small businesses and business income. For example, Texas charges a franchise tax that is based on your business’s income, and the state requires business owners to file a franchise tax report regardless of whether or not you owe any tax.

Another factor to consider is that many states require S corp businesses or partnerships to file a separate tax return. If you pay someone to file your taxes for you, this would be an added cost at tax time.

WHERE TO VOTE?

If obtaining a mail-in ballot is important to you, be sure to do research on how each state that you’re considering handles the process. Recent legislation in South Dakota may change the process and/ or accessibility for how full-time nomads vote.

Lastly, some states, like Texas and South Dakota, tax goods and services. It’s important to understand how your business would be taxed in the state that you choose, based on your specific business and the income you receive.

Choosing A State

Ultimately, there is a lot to consider when choosing a domicile state, including more minor considerations that we haven’t listed here. Availability of mailing services, proximity to family and friends, other tax considerations (including capital gains tax), and/ or the availability of social services, such as food assistance, could be important factors for you and your family. Make a list of all the factors you’re considering, and compare each state against it to see which state might best meet your needs.