Leaving New York? To 'Stick the Landing' Requires Careful Tax Planning: What you need to know before taking action.
November 2025
Contributors: Allen Schaefer, CPA, MBA, Robert Charron, CPA, Robert Spierer, CPA, MBA
A recent survey in the New York Post indicates that nearly one million New York City residents are preparing to leave the City, potentially setting the stage for the largest population flight in U.S. history.
High-income earners are increasingly moving to states with lower income tax burdens, such as Florida and Texas. With the ability for so many to work remotely anywhere in the country, to 'stick the landing' from a tax perspective, making the move may not be as simple as changing locations. When considering relocating to save on income and estate taxes, you must understand the tax implications of changing domicile among states and take the necessary steps.
Moving from New York requires careful tax planning due to the state's aggressive residency rules, which focus on proving a change of domicile (intent to establish a permanent home), avoiding statutory residency (physical presence and permanent abode), and addressing lingering tax issues. Failure to properly sever ties can result in costly audits, back taxes that include penalties and interest, especially for high-income earners.
In addition to Federal income tax rates, which range from 10% to 37%, New York State has nine income tax rates, ranging from 4% to 10.9% depending on adjusted gross income. Additionally, New York City residents pay local income tax rates ranging from 3.078% to 3.876% on top of the state tax rates. NYC Mayor-elect Zohran Mamdani has proposed various policies that would require large levels of funding, including city-wide free buses, universal childcare, and city-owned grocery stores. To pay for them, he has proposed creating an additional tax bracket for New York City residents with income over $1 million, which would be taxed at 5.9%, a 50%+ increase from the current NYC rate of 3.876%, making high-income NYC residents taxed at a combined top income tax rate of 53.8%, the highest in the country. In addition, Mamdani is advocating for a statewide top corporate tax rate increase from 7.25% to 11.5%. His tax proposals would need approval from Albany.
What is a New York Residency Audit?
New York residency audits, which are conducted New York State Department of Taxation and Finance (NY DTF), target former New Yorkers, nonresidents, and part-year residents to ensure that they have classified their New York State residency status correctly and pay the appropriate tax amount.
Residency audits examine how much time you spend in New York relative to another state you claim to have changed domicile to, your living and family situation, your wages or trade or business income, where you keep items "near and dear" to you, and other details related to state residency. Residency audits are unique in that they are case-specific and, in some cases, can hinge on seemingly unimportant details such as where the family spends the holidays, business involvement, possession of property tax or parking tax exemptions for residents, voter registration, and telephone services and activity.
In New York City, home to 400,000 millionaires and 123 billionaires, expect residency audits to ramp up. The NY DTF is notorious for aggressively auditing former residents. From 2021-2022, NY DTF state auditors collected $2.21 billion from 826,577 residency audits. From 2022-2023, NY DTF state auditors collected $3.22 billion from 756,344 residency audits.
Proving your Change of Domicile
Generally, you are considered a New York State resident, for income tax purposes, if you are domiciled in the state. For most people, this is straightforward: the primary residence where you live is both your state of domicile and the state in which you are a resident for tax purposes. However, under the Statutory Residency test, explained below, you can still be considered a resident of New York State for income tax purposes even if you are not domiciled in the state.
To establish a new domicile, the burden of proof is on the taxpayer to provide "clear and convincing evidence" that your permanent home has moved outside of New York. There are two basic elements of a domiciliary change (1) residence in a new location, and (2) intention to make the new location your permanent "home".
To help establish a change of domicile, be prepared to document your change in lifestyle by taking the following steps:
Establish a new home: Purchase or rent a new home outside of New York, ideally one that is larger and more valuable than any residence you keep in New York. Spend as much time in your new state as practical (preferably more than 183 days in a given year), but certainly more than the time you spend in New York. Apply for a homestead exemption from real property taxes on your residence in your new state.
Move "near and dear" possessions: Move cherished and sentimental items, like family photos, heirlooms, and valuable art, to your new residence.
Update your records: Change your driver's license, voter registration, and vehicle registration to your new state.
Update your financial connections: Open new bank accounts and safe deposit boxes in your new location and close your New York ones. Change your mailing address with the IRS and other financial institutions (i.e., brokerage accounts, K-1 investments, credit cards, pension benefits, social security), everything!
Re-establish ties: Find new doctors, dentists, and a veterinarian for your pets in your new state. Join local organizations, i.e. house of worship, social clubs, and community associations.
Show your intent: Execute a new will and update your estate planning documents in your new state. File a declaration of domicile in the county in your new state.
Avoiding Statutory Residency
Even if you successfully change your domicile to another state, you can still be considered a New York resident for tax purposes if you meet the statutory residency test. This test has two main parts:
Maintaining a permanent place of abode: This means you have a residence in New York (owned or rented) that is suitable for year-round use for "substantially all" of the tax year. New York has interpreted "substantially all" to mean more than 10 months.
Spending more than 183 days in New York in a given year: Any part of a day you are physically present in the state generally counts as a full day, save for special exceptions such as travel and medical. You should meticulously track your days in and out of the state using calendars, travel documents, and phone records. For individuals looking to track their days in any location, there are software applications available.
Lingering tax issues and planning
Even after leaving and you think you've escaped from New York's claw, you may face tax consequences if not addressed properly:
Accrued income: If you are a high earner with accruable items such as vested incentive compensation or unrealized income from an installment sale or a large gain is realized on a sale of a business or other asset shortly after you leave, New York may consider the income "accrued" while you were a resident and tax it accordingly.
Retirement income: As a nonresident, New York generally cannot tax your pension income. However, if you moved mid-year, the portion received while you were a New York resident could be taxable. The payment must meet certain tests to be excluded from New York tax.
Estate tax: New York has an estate tax that applies to the transfer of assets upon death (for 2025, the tax rate ranges up to 16%; the exemption amount is $7.16 million per individual), and for those with high net worth, proving a change of domicile is crucial for avoiding it. A unique feature of New York's estate tax is the so-called "cliff." If the estate's value exceeds the exemption threshold by more than 5%, the exemption is lost entirely, and the tax applies to the estate's full value—not just the amount over the threshold. This can result in unexpectedly high tax bills for slightly larger estates.
Real estate transfers: Selling real estate in New York could be subject to transfer and "mansion" taxes, depending on the property value and location.
For New Yorkers looking for the exits, given the complexity and high risk of residency audits, it is critical to maintain thorough documentation and seek professional tax advice. Keep detailed records of your whereabouts and any steps taken to establish a new life elsewhere. Planning to change domicile, especially where there will be a sizable future taxable event (i.e., business sale, installment sale, bonus compensation, exercising stock options, trading real estate in a like-kind exchange) can impact your overall tax liability and cash flow.
At Perelson Weiner, we understand the complexities of state tax planning and New York residency issues and can help you navigate through this challenging process and 'stick the landing'. If you have questions, please contact your Perelson Weiner professional.