Choosing a Domicile State

When deciding to become a full time nomad, there are 2 big questions that must people ask. The answers to the questions are related, but somewhat different. What state will you choose as your domicile? Without living in one place, how will you get your mail? I’m going to answer the first question today and will cover the second question in my next post.

What is a domicile?

A domicile is defined as “a state that a person treats as their permanent home, or lives in and has a substantial connection with.” As defined by the IRS and other governmental agencies, if you live in an RV full time and own no real estate, you are considered homeless. In most cases, this is a good thing. If you have no defined home, then you get to pick your “home” state.

There are several important factors to consider when choosing a domicile state. Some of these may or may not affect you depending on your particular situation. Some of these factors include state income tax, vehicle registration cost, vehicle insurance cost, and homeschool laws.

Please understand that no one can make this decision for you. You need to weigh all of your options and possibly speak with a tax advisor before you make your final decision. Choosing a domicile state should not be taken lightly.

The Big 3

There are 3 main states that full time travels choose. I’m going to review some of the high and low points of each state. My list is not 100% comprehensive and I encourage you to do your own research before making a decision.

Texas

• Pro – No state income tax
• Pro – Virtually no homeschool regulations at all
• Con – Annual vehicle inspections

Florida

• Pro – No state income tax
• Pro – Resident rates for Disney passes
• Con – Homeschooling is moderately difficult
• Con – High initial vehicle registration fees
• Con – High vehicle insurance rates

South Dakota

• Pro – No state income tax
• Pro – Only 3% sales tax rates on RVs
• Pro – Low vehicle registration cost
• Pro – Low insurance rates
• Con – More “invasive” homeschool laws requiring registration with school district, standardized testing results turned over to the state, and records on attendance, studies, etc. must be submitted to the state if they ask for them.

So which state did we choose?

For our family South Dakota just made sense.

Homeschooling: We travel with our 2 17 yr old daughters, Crushed and Tidbit, who had both completed their homeschool requirements before we made the official move to SD.

Car Tags: Our mail service made it very easy to secure our vehicle plates by mail, but we did renew in person when we went to SD.

Residency: To establish residency, you only have to spend ONE night in the state.

Drivers Licenses: You simply take 2 pieces of mail, a receipt from the hotel or campground that you stayed at for the night, a verification letter from your mail service, surrender your current out of state drivers license, and show your identification documents (passport, birth certificate, SSI card, etc). We were in and out of the licensing center within 30 mins. Voter Registration: We did this in person since it is across the hall from the tag office in our county, but I’m almost certain it can be done online as well. Being that we did it in person, they did ask to see the same campground receipt that we needed for our licenses.

The Financial Points

My chosen profession is a that of a bookkeeper, and specifically a bookkeeper who focuses primarily on nomadic entrepreneurs. I feel as though I would be completely doing you a disservice if I did not share with you the financial repercussions of some of these decisions if you own or are considering starting a nomadic business.

If you are on the road full time and do not own real property in anywhere, you are not allowed to deduct your travel expenses. I will give you 2 examples to show you the difference.

Example 1 –

Mary owns a home in Alabama. She needs to visit a client site in Texas for a week. Mary would be able to claim her expenses for her travel, hotel accommodations, meals, etc.

Example 2 –

Travis is a full time RVer. He is currently in New York, but needs to visit a client site in Montana. Travis would not be able to claim the expenses for his travels from New York to Montana. Travis would only be able to claim the mileage from where his RV is parked in Montana to his client’s location and back.

The difference in the 2 situations is that Mary has an established “tax home” in Alabama and is having to leave that tax home to conduct her business affairs. Travis is technically “homeless” and has no tax home. Since he has no “tax home” to leave, he is not entitled to deduct any of his travel expenses.