When is it mandatory to switch to CO residency? Tax Question (sales, leasing)

[ksneblett]

This has been slightly touched upon in other threads, but not exactly...We are moving to CO from TX, no income tax, we're not sure how long we'll be here, maybe just a year. My husband will not be employed here, he has just started a company in TX and it's registered in TX and his partners are TX residents. We are leasing home. Does anyone know when we absolutely have to become residents? The site is not completely clear, it talks about 90 days and a job in CO, but it also kind of made it seem like they wanted to make sure people had to definitely be here and show they are staying before 'getting" to become a resident, for in-state tuition, hunting licenses, etc.

We have just moved to CO, we are leasing a house but my husband is not employed here. He actually is not getting a salary anywhere because he is starting a company but right now it is registered in TX and his partners are TX residents. Do we still have to change our residency in the 90 day period? We don't know how long we'll stay, it may only be a year.

Thanks!

[jazzlover]

If you are "domiciled" in Colorado--that is, Colorado is where you intend to make your home, then you are a Colorado resident and subject to Colorado taxes. If you work and earn income in another state that has its own income tax, you may be able (and may be required) to file an income tax return there and pay income taxes on that income in that state--you can then claim an income credit on your Colorado state income tax return for the portion of income for which you paid taxes in the other state. However, if you earn the income in a state that does not have an income tax, you will have to pay Colorado income tax on that income, even though you did not earn it in Colorado. Regardless of where you live, if you earn your income in Colorado, you will have to pay Colorado income tax on the income earned in Colorado.

When I lived in Wyoming (which has no income tax), I had some co-workers who worked in Wyoming, but lived in Colorado. They had to pay Colorado income tax on all their Wyoming earnings. Conversely, I knew people who lived in Wyoming, but worked in Colorado. They had to pay Colorado income tax on their Colorado earnings.

In your circumstances, you MAY be able to retain Texas residency if you can show that you are only living in Colorado temporarily (usually considered a few months or less) and Colorado is not your domicile. That said, you will still have to pay Colorado income tax on any of your earnings that you make in Colorado, and you MAY have to register your vehicle in Colorado if you work here for more than, I believe, 90 days.

Texas and Colorado are essentially polar opposite in the taxation philosophy. Texas has no state income tax, low business taxes, extremely low vehicle registration fees, but very high property taxes. Colorado has very low residential property taxes, but relatively high business property taxes on real and personal property, relatively high vehicle registration fees, a moderate income tax, but relatively high total sales tax rates. Essentially, Texas is a fairly tax-friendly place for people who work for a living and for business; Colorado is most tax-friendly to non-productive retirees earning passive income who live in fancy McMansions.

Wyoming is about the lowest tax burden state in the Rocky Mountain West (and most of the US) for individuals because the minerals industry pays about 75% of the state and local tax revenue in the state. Wyoming has low property taxes, no state income tax, and a moderate sales tax. About the only high tax in Wyoming is vehicle registration fees--they are about what Colorado's are, which is not cheap.

[dude1984]

Originally Posted by ksneblett

This has been slightly touched upon in other threads, but not exactly...We are moving to CO from TX, no income tax, we're not sure how long we'll be here, maybe just a year. My husband will not be employed here, he has just started a company in TX and it's registered in TX and his partners are TX residents. We are leasing home. Does anyone know when we absolutely have to become residents? The site is not completely clear, it talks about 90 days and a job in CO, but it also kind of made it seem like they wanted to make sure people had to definitely be here and show they are staying before 'getting" to become a resident, for in-state tuition, hunting licenses, etc.

We have just moved to CO, we are leasing a house but my husband is not employed here. He actually is not getting a salary anywhere because he is starting a company but right now it is registered in TX and his partners are TX residents. Do we still have to change our residency in the 90 day period? We don't know how long we'll stay, it may only be a year.

Thanks!

I think the guidelines (Own or operate a business in CO, gainfully employed in CO, or living in CO for 90 days) are when you'd be eligible to become a resident if you want to become a resident. I don't think it is a requirement. If I were you, I would contact the state and or a lawyer that knows this stuff.

Department of Revenue - Division of Motor Vehicles:New Residents

[ksneblett]

Thank ya'll so much!