Can You Avoid Exit Tax?

Exit tax mainly involves part-year resident taxes alongside capital gains tax. Residency status in the state is the primary indicator in evaluating the responsibilities. In order to avoid unexpected results and minimize exit tax responsibilities in relocation from New York, several actions can be taken in advance: 

1. Part Ways with New York

• Closing bank accounts located in the state can be the first step.
• Terminating memberships with local clubs or organizations is another measure.
• The next move can be moving personal and business interests to the new state of residence.

2. Establish Residency in the New State

• Registering your vehicle in the new state demonstrates such relocation occurred.
• Another demonstrative action is updating voter registration and driver’s license.
• Leasing or purchasing a residential property in the new location also presents a clear relocation.

3. Maintain Clear Documentation

• It is fundamental to keep documentation like utility bills, rental agreements or property deeds that show the primary residence is no longer in New York.
• Physical presence should be tracked in order to support a residency change. If you spend more than 183 days in New York, tax responsibilities change considerably.

4. Plan Financial Aspects of the Relocation

• Any outstanding state taxes should be settled before moving.
• Professional tax advisory service providers are always a valuable option to establish full compliance with New York’s rules.

It is not possible to avoid exit tax completely when leaving New York. Strategic planning and full compliance with stat guidelines can reduce liabilities around this tax. We highly recommend seeking the assistance of tax professionals for a smoother transition process without surprises.