Recently there has been a lot of advice in getting a South Dakota driver's license and establish residency over there to avoid taxes in states like California, New York, Ohio etc. Here is my take on it:
You have to be careful in showing your residence in another state which does not have state tax. Ohio for example requires that you not only surrender your driver’s license but also must prove your abode in another state. In other words it requires you to prove the address where you are living. So one can go to South Dakota get a local address through a mail forwarding company (pay monthly charges) stay in a hotel for the night (one night stay is enough) and then apply to get the driver’s license. This is acceptable in South Dakota but then how to do your prove your abode there . (Abode is mentioned in the tax code in Ohio). I believe California also has strict rules and comes after you when you change your residence. Also you have to inform your new address in South Dakota to IRS, which in turn informs Ohio Dept of taxation and it automatically triggers audit. I have studied this and also talked to a Tax attorney. Again for Medicare Advantage plan you have to show the residence in that state even if you are away for 12 months . This means you have to establish relationship with at least a Primary Care Physician. I am not sure going just once to a PCP in South Dakota will be enough. State like Florida require at least 6 months to stay so you have to rent some cheap place to establish your residency which in turn can create all sorts of problem. (Florida does allows you to be away for more than 6 months if you have an RV registered in Florida) The best advice is to get the driver’s license from South Dakota (so you can drive in US) and then show your residency in Panama. South Dakota requires you to come once in five years to renew your license.
You can prove your residence in Panama by giving rental agreement, bills etc to the State Tax Authorities.
South Dakota also requires to serve in Jury duty when required. The exemption age is 80 years and above. Though they can exempt you once if you are away or have medical issues but 2nd time may create problems. So lot of pitfalls. Tax planning is important but take all the aspects in account.
You have to be careful in showing your residence in another state which does not have state tax. Ohio for example requires that you not only surrender your driver’s license but also must prove your abode in another state. In other words it requires you to prove the address where you are living. So one can go to South Dakota get a local address through a mail forwarding company (pay monthly charges) stay in a hotel for the night (one night stay is enough) and then apply to get the driver’s license. This is acceptable in South Dakota but then how to do your prove your abode there . (Abode is mentioned in the tax code in Ohio). I believe California also has strict rules and comes after you when you change your residence. Also you have to inform your new address in South Dakota to IRS, which in turn informs Ohio Dept of taxation and it automatically triggers audit. I have studied this and also talked to a Tax attorney. Again for Medicare Advantage plan you have to show the residence in that state even if you are away for 12 months . This means you have to establish relationship with at least a Primary Care Physician. I am not sure going just once to a PCP in South Dakota will be enough. State like Florida require at least 6 months to stay so you have to rent some cheap place to establish your residency which in turn can create all sorts of problem. (Florida does allows you to be away for more than 6 months if you have an RV registered in Florida) The best advice is to get the driver’s license from South Dakota (so you can drive in US) and then show your residency in Panama. South Dakota requires you to come once in five years to renew your license.
You can prove your residence in Panama by giving rental agreement, bills etc to the State Tax Authorities.
South Dakota also requires to serve in Jury duty when required. The exemption age is 80 years and above. Though they can exempt you once if you are away or have medical issues but 2nd time may create problems. So lot of pitfalls. Tax planning is important but take all the aspects in account.
