As the “baby boomers” begin to enter retirement, the topic of relocating from a tax perspective has become hot – especially for New Jersey residents these days. There could be a variety of reasons taxpayers consider relocating – warmer climates, closer to grandchildren, health reasons and, of course, avoiding state taxes.

The tax key to relocating is establishing domicile in the new state through a permanent move. Although domicile is defined differently in various states, generally domicile is a taxpayer’s true, fixed and permanent home. This home is the place where the taxpayer intends to return, even while residing elsewhere. Keep in mind – a taxpayer can have more than one residence, but can have only one domicile.

If domicile is not properly established, a taxpayer can be subject to income tax in both the former and new states of residence. In addition, if the taxpayer dies without establishing clear domicile, both the former and new states may make a claim on the taxpayer’s estate. Further, both...