South Dakota Residency - RV-Dreams Community Forum

Merikay · RV-Dreams Family Member

South Dakota Residency

Ckerr · RV-Dreams Family Member

Not an answer, but more questions to ask the tax expert.

1. Assuming CA has some sort of homestead exemption on property taxes, how would SD residency impact your status there?

2. Also, be careful about the time between establishing SD as your principle residence and the final closing date on the sale of your home in CA because if the length of time is too long it could impact your capital gains exemption for the sale of your primary residence.

For what it's worth, I believe you would pay sales tax based on being a SD resident if you had already established SD residency prior to the RV purchase.

Let us know what you find out. It might help someone else!

Terry and Jo · RV-Dreams Family Member

I do think you should consult with a financial expert instead of asking here, although there may very well be some here who are experts on California law. But, it wouldn't hurt to have more than one opinion on the matter.

I also think you will be taxed on any funds you remove from a 401K. Aren't those funded on pre-tax dollars? I'm thinking there is an age at which one has to wait before withdrawing funds from a 401K, but I doubt that would keep you from having to pay taxes on what ever comes out of the fund for the RV purchase.

Now that I think of it, I'd probably consult with three people. Your 401K manager, your financial advisor, and a tax attorney. You've spent a lot of years to build up your funds and it would be a shame to lose a bunch of it. After all, RV's aren't cheap, so a lot would be pulled out if you are going to pay cash.

Terry

DorisandDave · RV-Dreams Family Member

Merikay,

I can't say what laws are in California, but here is what we did when we established residency in SD after living and working in Kansas.

While still living in our unsold home, we contacted America's Mailbox and established a mailing address with them. We did not begin forwarding our mail at that time, but had everything ready for when we would. We didn't want to change everything over until we were in our last month of our jobs. We will still have to file taxes in Kansas next year for income earned there this year, but after that won't have to.

The income earned on the sale of the house is a non worry, cuz we did not realize enough gain to even have to pay any taxes on it. (lived it for 12 years as our principle resedence)

When we sold the house and were living in our old 5er we changed our insurance to NCIS and used the SD address.

While living in our old 5er but still working our old jobs we purchased a new 5er from a dealer out of Omaha NE. We registered the new 5er in SD (all through the mail and with help of the fine folks at Americas Mailbox). There is no sales tax in SD, but you do pay a one time excise tax of 3%. Since sales tax where we were living (our old state of residence) is 7.6%, we saved 4.6% just on that.

We have quite a high registration fee in Kansas so we saved about $2000 just on that. At the same time we registered our new 5er in SD we also registered our truck there. It was also considerably less in SD than in Kansas.

When you want to finish establishing residence (and within 90 days of registering your RV) you will need to get a SD driver's license. For this you WILL need to go there. Doesn't matter what city or what county, but check ahead of time for WHERE they have driver's license offices, because they are few and far between and the hours are screwy.

You will need to stay overnight and produce your hotel bill as proof you did. You need other docs too, but the state website is very helpful.

The month before we started fulltiming on the road, we had our mail forwarded from PO box we were using in our old town to our Americas Mailbox address and got busy changing addresses with all the companies, bills, banks etc.

We have been on the road just over a month and the mail forwarding is working great, our residency is now SD and we have not had any problems with it.

I have not explained the registration process in detail because when you sign up with Americas Mailbox they have detailed instructions on what you need to do and when. They also have the forms you need on their website and you can call them or email them for help. I would imagine (hope) that any SD mailing service you select would have the same service.

The short of it is that doesn't matter where your residence is, if you earn income in a state you have to file taxes there. When we withdrew from the retirement plan they had to withold taxes for the state that they had in our address on record - Kansas. Don't know if that would be the same for your plan. So when we do our income taxes next year, we will have to include that.

That was it for us...hope it helps and I did not get too convoluted for you. confuse

Doris

Merikay · RV-Dreams Family Member

Thank you all for the answers. I hope others who have gone thru the transition will tell me their stories as well. This is all at least a year away for us, but I'd rather start getting information now than wait until the last month.

California has a 9% sales tax, and income tax. I know we will have to pay federal income tax on anything we take out of the 401K.

I'm actually hoping we will be able to sell the house in a reasonably quick time and pay for the RV out of the proceeds. I just don't want to pay more than I have to, nor do anything that will bring us penalties or sleepless nights.

phyllen · RV-Dreams Family Member

We started fulltiming last February. First had residency in TX (what a mistake that was - money down the toilet!). Changed to SD after only 6 weeks. Got truck and fiver registrations through our mail forwarding service. Worked with a broker to get insuances. We went to SD in May and got drivers licenses.

We still owned a house in NJ. (Daughter is buying it and was living in it - we go to NJ next week to finally make settlement - hooray).

Last summer found us in NJ due to having repairs done on fiver following accident in TX. Was in NJ for three months. While there Leonard worked for company I retired from.

When we filed income taxes this year, had to file with NJ because he worked one month before retiring and then the 3 months in the summer. However, we only had to pay NJ taxes on the income from January as that was the only month our legal address was NJ. We received back all NJ taxes taken out those 3 months he worked in NJ but was not a resident.

6 weeks ago we bought a new truck while traveling through Texas. Instead of the 8+ tax rate of Tx, we paid 3% due in SD. Dealer handled the paperwork. However, we got a call from our mail forwarding service we owed a bit more. Seems the dealer only sent 3% on the final price of the truck but we still owed more because we also had to pay the excise tax on the amount of the rebates we received. I did find it somewhat strange that we could not send the money directly to the county, but had to work the transaction through the mail forwarding service.

Our owning a house in NJ and domiciling in SD does not yet appear to be a problem. I guess if it bites us, we will know next week as we make settlement. Or even maybe when we file taxes next January???

Mallo · RV-Dreams Family Member

Yes you can get your South Dakota Residency and such taken care of in advance.

The issue becomes (in fact the State of South Dakota last year had to turn over documents on this to several other states) that you can easily end up reverting back to CA residency.

Once you "move" to South Dakota you have limits on the amount of time you spend in a state before you will automaticly become a resident of that state.

The details of CA I don't have but for PA I can give you the run down.

If the truck is in the state for more then 90 days in a row I am required to get PA license plates (This is why our truck still has PA tags PA is the state it spent the most time in so that was the correct state for it to be licensed in.)

If I spend more then 180 days living in PA then I become a PA resident by statute. Something that last year when I had a house still in PA I was very careful not to do.

Now what this ment tax wise was I had and still have to file an out of state residents return in some states that will hit you with a higher tax bill then being an resident of the state.

In the case of PA there is no effect so I pay the pro rated taxes for the time I am actually in PA and go from there. When I set this up I had to be very scrupulous as at the time I was a minority partner in a tax office.

This points up a few issues.

One of the biggies is the belief that just because you have set your residency in X state you can then basicly live in another state and pay no taxes this simply isn't true and as some people have found in the last year there are states starting to go after them.

The biggest issue with SD, Texas, FL residency as I see it from the prespective of State and Local taxation. Is snowbirding, a lot of folks from high tax states (cough New York cough) will spend 4 to 5 months in Texas or Florida and use a mail forwarding address from those states but then go back to their old "home" and spend the rest of the year. Since they are spending more then 180 days in the old "home" state they are in fact residents of that old "home" state with maybe a few execptions (some of those being a shorter time to trigger some of those being very lenient states on this issue).

One of the things I would advise anyone looking at setting residency to mitigate taxes is to take a long hard look at your travel patterns and see if there is a state you spend a significant amount of time in if so you need to know two things about that state;

If you lived there would you owe taxes?

if yes to that then you need to know

How long can I live there and not be considered a resident?

If your not a resident you can likely skate but you may technically owe a non resident return most states don't require one for minimal stays in the state but even that is not cut and dry any more (New York vs Conn for example). What you do not want is for that state to be able to prove by their statute that you should be considered a resident of the state because then you'll have to be able to prove you're not that you are a resident of South Dakota for example.

This is in fact the data that South Dakota has had to turn over lists of people some states are interested in that may really be residents of the requesting state that are claiming South Dakota residency.

This is really more of an issue for folks that sit in a single location for months at a time then it is for the gypsy's out there much harder to get a paper trail on a moving target.

Mallo

Gary and Linda · RV-Dreams Family Member

hi everyone. it's been a while since I have been on here. so much stress with selling our two homes. tension and migraine headaches every single day.I know these questions have been asked before but if you will bear with me I would appreciate it. cannot stay on the computer long as the light from the screen is killing my eyes. but I need to know what we are supposed to do or what we should be doing at this point of the journey. we know what rig we are getting and also truck to pull the rig. we're planning on buying these at our home state of Ohio. We want to domicile in South Dakota. What steps do we need to do now to get the process started In simple terms could someone explain to me what the benefits are of changing our domicile. We would like to spend a lot of our time in SD. But the plan is still to travel to as many states as possible. I have the start of dementia and I want to do as much as possible while I can. My husband will be getting a hip replacement in a couple months before we hit the road. Like I said a lot going on and feeling very overwhelmed because it's hard for me to retain information that is not written down. any help would be greatly appreciated. I came back here as the different groups on Facebook give you a hundred answers to one question confusing me even more. thanks to all god bless and happy trails!

Jake62 · RV-Dreams Family Member

Linda,

Certainly a stressful time in life, but let me attempt to make this as concise as possible regarding future domicile in SD.

First, the advantages: 1. No State Income Tax; 2. 3% sales tax if you register your rig in SD; 3. Driver's License is good for five years and you don't have to return to SD for the first renewal. Contact "Dakota Post." which is a mail forwarding service which can assist in your transition and walk you thru the necessary steps. Escapees has one also.

The "first" step is to sign up for a mail box thru one of the mail forwarding services, like Dakota Post. http://dakotapost.net/faq/

After that, you will have to travel to SD to get your DLs. But again, for a real person to help you and walk you thru everything you need, Dakota Post would be extremely helpful.

Best of luck & hope to see you on the road,

Tim

-- Edited by Jake62 on Friday 22nd of May 2015 11:40:38 AM

MarkS · RV-Dreams Family Member

If you buy it and take delivery outside of CA and you don't bring it into the state for 6 months ( I think) you don't pay CA sales tax..