Most people assume that when you move to a new state, your old state stops taxing you. Pack the boxes, change your address, done.
That’s not how several states see it.
California, New York, New Jersey, and a growing list of others have built legal frameworks that allow them to continue taxing departing residents — sometimes for years, sometimes on income earned entirely in another state. And with the new wave of millionaire taxes moving through legislatures and ballot initiatives in 2026, the mechanisms for capturing departing wealth are only getting more aggressive.
Here’s what you need to understand before you make a move.
Why there’s no formal “exit tax” — and why that almost doesn’t matter
Technically, no U.S. state charges a tax simply because you’re moving away. Courts have generally held that such a direct levy would be unconstitutional. What states do instead is more legally durable: they extend residency definitions, expand the reach of income sourcing rules, and audit departing taxpayers with particular intensity.
The practical effect for a high-net-worth individual can look a lot like an exit tax, even if no one calls it that.
The California playbook
California is the most aggressive state in the country when it comes to holding on to departing taxpayers. The Franchise Tax Board (FTB) is well-resourced, motivated, and has a long institutional memory.
If you move out of California, the state can still tax:
- Any income sourced to California — rents, business income, capital gains on California property, and compensation earned while performing services in the state
- Worldwide income earned during any period of partial-year residency — if you maintain even a secondary residence in California, the FTB may argue you remained a part-year resident
- Income deferred while you were a resident — stock options, deferred compensation, and other arrangements that vested or were earned while you lived in California are often still taxable by California even after you’ve relocated
California’s 2026 Billionaire Tax Act ballot initiative takes this a step further. As proposed, the initiative would apply retroactively to any billionaire who held California residency as of January 1, 2026 — nearly ten months before voters could even approve it in November. Under the initiative’s terms, relocating after that date would not erase the obligation. However, the retroactive residency date is one of the measure’s most legally contested features: tax attorneys at Baker Botts and analysts at the Tax Foundation have both flagged it as highly vulnerable to Due Process challenge under both the U.S. and California Constitutions. Whether the January 1 cutoff survives litigation — if the measure passes at all — remains an open question.
What makes California particularly consequential is the breadth of its existing income sourcing rules and residency enforcement posture. Even without a wealth tax currently on the books, the Franchise Tax Board actively audits high-income departures and can assert California tax liability on income earned from California-source business interests, pass-through entities, and deferred compensation arrangements — regardless of where the taxpayer now lives. The proposed 2026 Billionaire Tax Act, if passed and upheld, would add a one-time 5% tax on the total worldwide net worth of California residents with net worth exceeding $1 billion — a fundamentally different and more sweeping form of taxation than any income-based levy. (Source: California Franchise Tax Board, Residency and Sourcing Technical Concepts, ftb.ca.gov; Tax Foundation, California Wealth Tax: Details & Analysis, January 2026, taxfoundation.org.) A California resident with globally diversified holdings is potentially subject to California taxation on wealth that has no California connection whatsoever.
How California determines you’ve actually left
The FTB looks for a clear, documented break. Simply having a new address in Florida is not enough. Auditors examine:
- Where you spend the most days (the “closest connections” test)
- Where your spouse, children, and close family members live
- Where your primary bank accounts, vehicles, and valued personal property are located
- Where you vote, hold professional licenses, and maintain club memberships
- Whether you retained a California home (even a vacation home can restart the residency clock)
High earners leaving California should expect a residency audit. It is not a question of whether — it is a question of when and how well-documented your departure is.
New York’s grip
New York operates a similarly aggressive residency framework. The state uses a “statutory resident” test that can ensnare people who don’t consider themselves New York residents at all: if you maintain a permanent place of abode in New York and spend more than 183 days in the state in a calendar year, you’re taxed as a full-year resident — even if you’re domiciled in Florida.
For high earners who still own a Manhattan apartment or a Hamptons home after relocating, this is a live risk. The apartment doesn’t have to be your primary home. It just has to be a place you could use.
New York City has its own additional layer. Mayor Mamdani’s proposed 2-percentage-point surcharge on income above $1 million — which would push the combined city and state rate to nearly 17% for top earners — is pending state authorization. If it passes, the financial penalty for maintaining any New York nexus after relocation will grow substantially.
New Jersey’s withholding mechanism
New Jersey takes a more transactional approach. When residents leave the state and sell their New Jersey primary residence, New Jersey requires nonresident sellers to make an estimated Gross Income Tax payment at closing — calculated as the higher of 10.75% of the estimated gain on the sale or 2% of the total sale price, regardless of whether a gain actually exists. The withholding is collected via Form GIT/REP-1 before the deed can be recorded. Sellers who overpay relative to their actual tax liability can file for a refund after closing. (Source: NJ Division of Taxation, N.J.S.A. 54A:8-8 through 8-10; Technical Bulletin TB-57(R), revised September 2025.) This withholding is applied at closing, before you ever file a return.
It’s framed as a tax compliance mechanism rather than an exit tax, but for a high-value home sale, it can represent a significant sum held by the state until you file and prove your gain calculation.
Washington’s new reach
Washington’s freshly signed millionaires’ tax (Senate Bill 6346, effective 2028) includes sourcing rules that apply to nonresidents with Washington-source income. Business owners, investors in Washington-based pass-through entities, and executives with Washington compensation could find themselves subject to the 9.9% rate even after leaving the state — if their income is traced back to Washington-source activity.
This is a meaningful expansion of the traditional model. Previously, Washington’s lack of any income tax made it a clean jurisdiction. That is no longer the case for high earners with economic ties there.
The common thread: domicile documentation is your strongest defense
In virtually every residency audit and state tax dispute, documentation is among the most consequential factors — though not the only one. Residency determinations are inherently facts-and-circumstances analyses, and auditors weigh multiple variables: where you spend time, where your family lives, where your economic ties are strongest, and the totality of your lifestyle connections to each state. Strong, consistent, contemporaneous documentation materially improves your position and can be decisive — but it does not guarantee a favorable outcome. Audits can hinge on factors outside your control, and even well-documented departures are sometimes contested successfully by state revenue agencies. The individuals who lose these disputes, however, are almost always the ones who moved physically but failed to move legally and administratively.
The individuals who lose these audits are almost always the ones who moved physically but didn’t move legally and administratively. They kept the old home. They didn’t change their voter registration. Their estate planning documents still listed the old state. Their club memberships, charitable affiliations, and professional licenses were never updated.
Establishing defensible Florida domicile — particularly when leaving a high-audit-risk state like California, New York, or New Jersey — requires doing all of those things deliberately and documenting them in a way that will hold up years later in a residency dispute.
The window is narrowing
With California’s ballot measure moving toward a November vote, Washington’s two-year runway before implementation, and New York City’s budget pressure driving continued advocacy for higher rates, the 2026–2027 window may be the most important planning period many high-net-worth individuals face in a generation.
The mechanics of establishing Florida domicile are not complicated — but they require doing the right things in the right order, with the right documentation. Getting it wrong, or doing it halfway, can mean your old state comes back years later and makes the case that you never really left.
Download our free Florida Domicile Checklist — it walks through the precise steps high-net-worth individuals need to take to establish legally defensible Florida residency, and avoid the most common mistakes that give high-tax states the opening they need. The checklist is educational in nature, addresses Florida-specific requirements only, and is not a substitute for individualized advice from a qualified tax attorney or CPA familiar with your prior state of domicile. Outcomes depend on individual facts, documentation quality, and state enforcement practices; completing the checklist does not guarantee tax savings or legal defensibility in a residency dispute.