Choosing A Home Base

Selecting a Home Base can be a very complicated proposition.

First of all, what do we mean by a Home Base? Well, in the United States you can be a U.S. citizen, but you also have to be a citizen of some state. The state in which you establish "domicile" will be your Home Base. Legal domicile is different from "residency". Residency is of a more temporary nature and you can have multiple residences. However, you can have only one legal domicile.

The law basically says that you are a domicile of the state where you "intend" to establish domicile, but that "intent" must be proven by having "significant contacts" with that state. In other words, "intent" alone is not enough.

The most significant contact of all is where you actually live.

However, since full-timers "live" all over, the states then look to other "contacts" such as where you work, where you own property, where your vehicles are registered, where you are registered to vote, where you have your driver's license, where you have your will, etc.

State's want to claim you for population and taxes if they can, so where you intend to have your domicile and where it might be under a court decision might not be the same. Again, "intent" is a very important factor, but it must be backed up with evidence of other "contacts".

So assuming full-timers can choose where they want to establish their domicile by having "intent" and by establishing "contacts", the following things are to be considered:

  • Convenience
  • Income Tax
  • Property Taxes & Vehicle Registration
  • Insurance

    You can establish "contacts" with different states for different purposes. But you must be careful. You can actually get yourself in a tug-of-war between states and end up having to pay taxes you never expected. The states have different threshholds for determining whether your "contacts" with them are significant enough to claim you. It may not be fair, but it can happen.

    Our advice is to leave no room for doubt and have every contact you can with a single state, or at least have minimal contacts with the states you don't intend to be your domicile.

    Convenience As A Factor In Choosing A Home Base

    Every full-timer RVer starts full-timing from a state where they have previously established domicile.

    Often they have family in that state, grew up in that state, lived many years in that state, return to that state often, and/or genuinely like that state. They are familiar with its laws, taxes, and administration.

    It can simply be the familiarity and the convenience of maintaining that state as their Home Base that keeps them from changing. Some will even admit that they have not re-established residency elsewhere because of laziness.

    Although it may not be the best rationale financially, there is something to be said for the convenience factor. For example:

  • It's easy
  • There is no misunderstanding of other state laws (which can be costly)
  • There is no mind-numbing research to do
  • There is no annoying government paperwork to complete

    State Income Tax As A Factor In Choosing A Home Base

    State income tax rates are probably the number one factor full-timers use in selecting a Home Base.

    Presumably, every full-timer has some type of income although the amounts vary widely. Depending on the type of income (some states exempt certain types of retirement income), the majority of the states tax income in some amount ranging from less than 3.07% to 13.3%.

    There are seven states that have no state income tax:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

    New Hampshire and Tennessee also do not have a state income tax on salaries and wages, but they do have an interest and dividends tax which affects many retirees.

    Most of the rest of the states have some graduated scale based on the amount of income.

    Many full-timers blindly choose a state with no income tax. But it could be that a state with some tiny income tax on low income earners is a better choice.

    Also, as we will see later, state of domicile determines insurance rates, so it is possible that a no-income-tax state may cost you more in higher insurance premiums than it saves in income taxes.

    The question we always hear is "Which state is best?" Often, the answer we hear given is "A state with no income tax". It is our contention that answer is not always correct depending on individual circumstances.

    It's easy to choose South Dakota, Texas, or Florida, the three most popular states of domicile for full-timers, but be careful and do your homework.

    Property Taxes (& Vehicle Registration) As A Factor In Choosing A Home Base

    Personal Property Taxes vary greatly by state, and it can be difficult and time consuming comparing your options.

    There are many states that do not charge Personal Property Taxes, but several that do. When Personal Property Taxes are charged based on the value of your RV, your towing vehicle, or your tow vehicle, the amounts you owe each year can be large - hundreds and possibly even thousands of dollars. Also, rates can vary by county and even city.

    Unfortunately, we don't have any great suggestions to easily track down Personal Property Tax rates other than a internet search of "Personal Property Tax By State" or "Vehicle Tax By State". So as you narrow down the state you will choose as a Home Base, be sure that you check for Personal Property Taxes in the jurisdiction where your vehicles would be registered.

    Vehicle Registration fees also vary greatly by state, but the amounts are not as significant as taxes in most cases. However, it pays to be sure since some states charge a tax on the value of your vehicle when you register it. Usually you will get a credit for sales or use tax paid to the prior state, but not always. Again, not checking can be costly.

    A major issue with registration and licensing is the state requirement for getting RVs and the other vehicles registered. Be sure to check out whether the state you choose requires annual vehicle safety inspections and/or emissions inspections. You probably don't want to have to return each year to have inspections done.

    Also, find out whether you can register your RV and vehicles by mail or internet. Those annual trips for such administrative tasks can be annoying.

    While we are at it, also be sure to find out how often you need to renew your driver's licenses.

    Take nothing for granted!

    Insurance As A Factor In Choosing A Home Base

    All insurance - health, life, RV, vehicle - rates are based on your state of domicile. The establishment of rates is done through complicated mathematical calculations and statistics (actuarial science). Actuarial risk is part of the process called underwriting.

    In order to determine rates, underwriters review the claims rates by state and even by zip code in most states. If your state is a high risk state, you can be punished just by where you have a legal address.

    Health insurance is the biggest expense of all the insurance, but all insurance types can be affected by your address. And just because one insurance rate is lower in a particular state, it doesn't mean that all types of insurance will be lower in that state.

    If you happen to have your health insurance under a government program or retirement program where your state of residence does not matter, consider yourself lucky. If not, and you have to pay your own way, do not choose a state without comparing health insurance plan rates. What you could save in taxes with one state, could be given right back in higher insurance premiums. This is especially true under the Affordable Care Act - states that were previously top choices for full-timers may not be now due to changes in plans offered.

    On a side note, full-timers want to make sure they have a national system of "in network" health providers and that your coverage is "portable" from state to state. Again, with the Affordable Care Act and its effects, many full-timer-friendly plans have disappeared. It's very important to do your research on health insurance as it may be the most significant piece of your decision-making process.

    Again this Home Base thing can be very complicated. You can see why many folks opt for the "most convenient" choice. :)

    Our Choice Of Home Base

    Since we went on the road in the middle of a year, we chose to remain Kentucky residents. We had already had seven months of income in Kentucky, and we had registered our vehicles there since we had them months before we hit the road.

    So for 2005, our choice was based mostly on convenience. We did not want to have to file multiple state tax returns when the amount of income earned the last half of the year would be so small.

    We talked about changing residence at the end of 2005 since Kentucky does have a 6% state income tax. However, our health insurance premiums are much lower than they would be in other states. Since we expected our income in 2006 to be low, the income tax didn't outweigh the health insurance savings.

    Then, in mid-2006, we took title to my parents' house for estate planning purposes. So, since we own property in Kentucky, and our income for 2007 will be low, we will remain Kentucky residents for awhile.

    The only real downside for us is personal property taxes on our truck and fifth wheel. But those taxes are offset by low insurance rates and being able to save on mail forwarding services since we have a great friend in Kentucky that handles that for us. Plus the personal property taxes go down each year as our vehicles depreciate in value.

    It took us hours and hours to research alternatives, and though our income has increased over the last few years and we've had to pay more in state income taxes, our low insurance rates have offset those taxes for the most part.

    Our advice stands - do your homework on every expense that is affected by your choice of Home Base. It's not easy, but you might be surprised by how much money you can save.