Why this matters more for physicians

State income tax rates in the U.S. range from 0% (Texas, Florida, Tennessee, Nevada, South Dakota, Wyoming, Washington, Alaska — the "no-tax" nine) to over 10% (California, Hawaii, New York for high earners, New Jersey, Oregon, Minnesota).

For a $500K attending, that's the difference between owing $0 and owing $50K+ in state income tax annually. For a locum-oriented graduating fellow whose gross could easily hit $600–800K in a heavy locum year, the number is bigger.

Two things you need to know:

1. Your resident state gets the first bite of your income, regardless of where you earned it.
2. Non-resident states can also tax the income you earned while physically working there. Most of them do. You usually get a credit against your resident-state tax for taxes paid to non-resident states — but you can't get a refund of taxes paid to a non-resident state that exceed your resident-state rate.

Effect: choosing a home state matters a lot. Choosing a home state with 0% income tax means the non-resident states you work in get their share, but you never pay a second bite on top.

What actually determines residency

Every state has its own domicile rules, but the common tests are:

1. Physical presence. How many days per year did you spend in each state? Most states use a 183-day threshold — spend more than half the year in State X and you're statutorily their resident regardless of other factors.
2. Domicile intent. Where do you consider your "true home"? States look at:
   • Voter registration. Where are you registered?
   • Driver's license and vehicle registration. Where?
   • Primary residence ownership or long-term lease. Where?
   • Dependents' schools. Where do your kids attend?
   • Spouse's job and voter registration. Where?
   • Professional licenses. Where's your primary medical license?
   • Mailing address / bank / brokerage / church / gym / doctor. Where?

No single factor is dispositive. The best defensible position is that all or nearly all the "domicile intent" factors point at the state you claim as home.

The classic mistake

Fellow graduates in California, gets recruited to a locum agency, works assignments in three states, and never officially moves. California considers them a resident all year and taxes 100% of the income. The other three states also tax the income earned within their borders. California grants a partial credit for those taxes, but California's rate is so high that the credits don't cover the whole hit.

Net effect: they pay CA's ~10% state tax on the whole year's income, plus a bit more where the other states' rates exceed what CA credits.

The fix would have been to establish residency in a 0% state (say, Texas) before the locum year began, then work assignments as a non-resident everywhere including the occasional California shift.

Establishing residency in a 0% state

This is a real move, not a paper move. To defensibly claim Texas (or Florida, Tennessee, etc.) as your home state, before the tax year begins:

• Lease or buy a residence there. Not a P.O. box, not a friend's spare room — a real place you can produce a lease or deed for.
• Move driver's license, voter registration, vehicle registration.
• Change bank primary address, brokerage account address, health insurance, dependents' schools.
• Get a Texas medical license as your primary and let your CA license go inactive if you're not returning.
• File a final part-year resident return in the state you're leaving, showing the move date.

Then work locum assignments across the country as a non-resident of every state including your former home state. File non-resident returns in each state where you earned income above their filing threshold; file a resident return in the 0% state (which is trivial — no state income tax return).

The audit risk

States that lose high-income residents to 0% states do audit. California in particular is aggressive with "reverse audits" of residents who claim to have moved to Nevada or Texas. The audit looks for evidence that you didn't really move — that you kept a California residence, kept spending most of your time there, kept your kids' schools there.

You defeat the audit by having actually moved. You lose the audit by trying to have both — a nominal Texas address for tax purposes and a real California life. States can look at credit card statements, EZ Pass records, cell phone tower data, Instagram check-ins, medical appointments. The physical presence test isn't easy to fake.

If you want the tax benefit, take the physical move seriously.

When the move isn't worth it

The 0% state move only pays off if:

1. You'll actually generate substantial income for at least 12–24 months. A one-year experiment barely covers the transition costs.
2. You genuinely have no strong ties keeping you in your current state. If your spouse's job, your kids' schools, or your extended family are all in California, the move isn't real.
3. Your locum assignments won't concentrate in a small number of higher-tax states that would tax you similarly to your home state anyway. If you're doing 70% of your locum work in New York and Massachusetts, moving to Texas doesn't help as much as you'd think.
4. You're comfortable that the move is permanent (or at least multi-year). Bouncing state residency year-to-year invites audits.

Multi-state locum practical checklist

For fellows planning heavy locums regardless of the domicile decision:

1. Track workdays by state, meticulously. Every state's non-resident return needs a days-worked-in-state number. A simple spreadsheet with assignment dates and locations is enough.
2. Watch reciprocity agreements. Some pairs of states (NJ/PA, MD/VA, KY/IN, IL/IA/KY/MI/WI) have reciprocity agreements that let you owe income tax only in one of them. Doesn't help across most state pairs, but check.
3. File early in each non-resident state. Non-resident returns are often more complex than resident ones. Don't leave them for April 14.
4. Withhold or make estimated payments to non-resident states. Many locum agencies won't withhold state tax for you. That's your problem. Make estimated payments to avoid underpayment penalties.
5. Keep every 1099-NEC and 1099-MISC. They arrive from every agency and client. Your CPA needs all of them to reconcile against the non-resident returns.

The bigger point

A graduating fellow considering a locum-heavy first year has one moment — the pre-move planning window in the last months of fellowship — when the tax structure can be shaped materially. After the locum year begins, you're mostly reacting to whatever state situations you've created.

Talk to a physician-focused CPA in the fall of your PGY-6 year about what your first attending / locum year is going to look like, and get their input on residency planning before you start signing assignment contracts. It's cheaper than fixing it retroactively.

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About this article. This is a draft written by LeoMed staff, pre-review by a physician-focused CPA. State residency rules vary considerably by state and change over time; verify current statutes and consult a CPA before making a residency move.