Tax residency rules, audits, and the severance record (2026)
2026.1 Edition · Revised 2026-07-25 · DomusDay Research
Moving out of Alabama is easy. Stopping Alabama taxes is a different act, and it happens on paper: Alabama keeps treating you as a resident until the record shows otherwise.
On the burden of showing otherwise: The taxpayer bears the burden of proving a change: physical presence in the new jurisdiction plus intent to establish domicile there, coupled with abandonment of the old.
There is no day-count to get under. Alabama has no day-count statutory residency test. Rule 810-3-2-.01 makes residence turn entirely on domicile: individuals domiciled within Alabama are taxable on their entire income whether earned within or without the state, regardless of physical presence in Alabama at any time during the year. There is no threshold to stay under and none to cross — the domicile record is the whole test. That makes the evidence trail — where the pattern of an actual life points — the entire case. Everything on this page exists to answer one question: if ALDOR asks, does your record hold?
Rule 810-3-2-.01 taxes individuals domiciled in Alabama on their entire income regardless of physical presence in the state at any time during the year. A domicile continues until a new one is established coupled with abandonment of the old, and the taxpayer carries the burden of showing both.
Source ↗Alabama splits the change year: Form 40 as a resident for the period of residence, covering income from all sources, and Form 40NR as a nonresident for Alabama-source income in the rest of the year. Exemptions go on the part-year return; none are claimed on the nonresident return.
Source ↗Alabama's brackets are 2% on the first $500, 4% on the next $2,500, and 5% above $3,000 — $1,000, $5,000, and $6,000 for married filing jointly. For most filers the schedule works like a flat 5%, and capital gains sit in the same base.
Source ↗Act 2025-334 excuses Alabama filing and withholding for a nonresident employee who works 30 or fewer days in the state, performs duties in more than one state, and lives where a similar exclusion or no income tax applies. Day 31 brings all Alabama-earned income into tax.
Source ↗Alabama has no day-count statutory residency test. Rule 810-3-2-.01 makes residence turn entirely on domicile: individuals domiciled within Alabama are taxable on their entire income whether earned within or without the state, regardless of physical presence in Alabama at any time during the year. There is no threshold to stay under and none to cross — the domicile record is the whole test. Days still matter — not as a threshold to duck under, but as evidence of where the year was actually lived, and as the trigger for the presumptions below.
Selling the apartment is not the test, and neither is the new driver's license. Alabama presumes an established domicile continues until it is shown to have changed — domicile is the home, the fixed place of habitation where one lives and has a permanent home and principal establishment, and to which there is an intention of returning when absent. On the burden: The taxpayer bears the burden of proving a change: physical presence in the new jurisdiction plus intent to establish domicile there, coupled with abandonment of the old. Examiners weigh 3 primary factors — the fixed place of habitation, abandonment of the alabama domicile, presence in the new jurisdiction with intent to remain — and they weigh what you did, not what you intended. The pattern of an actual life somewhere else is the evidence; everything else is secondary.
A clean exit does not end every Alabama claim. These rules keep taxing specific situations after the move — each one is a way the state stays in your return.
AffectsLeavers who keep Alabama workdays, Alabama rental or business property, or an Alabama business interest.
AffectsAnyone who moves without closing out the Alabama home, and anyone whose new-state arrangements are temporary or seasonal on paper.
AffectsMovers who leave Alabama but keep returning for work, and arrivals who still perform duties for an out-of-state employer.
Alabama Department of Revenue (ALDOR) runs a low-intensity residency program. ALDOR publishes no residency-specific audit program or statistics; residency questions arise in ordinary individual income tax examination, where the domicile definition in Rule 810-3-2-.01 supplies the standard. An examination is not an argument about intentions — it is a request for documents, and the request looks like this:
Every item on that list either exists in your records from the year of the move, or it does not. That is the whole game — and why the severance record below is the section that matters most.
An audit years from now is answered with documents generated in the months around the move. This is that inventory — grouped the way examiners think about a life, each item paired with the evidence it leaves behind.
With no day-count test, the departure year turns on two dated facts: abandonment of the Alabama habitation and establishment of a new one. Alabama also splits the change year across two returns rather than one — Form 40 for the resident period, Form 40NR for the nonresident period — with all exemptions claimed on the part-year return and none on the nonresident return. Work performed in Alabama after the move stays Alabama-source, subject to the 30-day nonresident-employee rule.
A driver license from the state of previous residence may be used for 30 days after becoming a resident of a new state — so the license exchange in the destination state is a dated marker on the departure side too.
Source ↗Alabama registrations follow the vehicle's presence in the state; registering vehicles in the new state generates dated records there and closes out the Alabama tag.
Source ↗Alabama voter registration attaches to Alabama residence; registering in the new state supersedes it and is dated by the new state's election officials.
Source ↗Rule 810-3-2-.01 requires abandonment of the old domicile alongside establishment of the new one; what happened to the Alabama dwelling, and when, is the central dated fact.
Source ↗The new fixed place of habitation is established by the deed or lease in the new state together with presence there — the rule requires both, not either.
Source ↗An Alabama homestead exemption asserts the property is a single-family owner-occupied primary residence on the first day of the tax year; it is claimed and revisited through the county taxing official, so the county record shows when the claim stopped.
Source ↗Banking and advisory relationships moved out of Alabama corroborate where the principal establishment now sits under the rule's definition.
Days worked in Alabama after the move drive both Form 40NR sourcing and the 30-day nonresident-employee rule, which turns on a count of days worked in the state.
Source ↗Property owned or business transacted in Alabama keeps generating Alabama-source income for a nonresident, whatever the domicile record shows.
Source ↗Physicians, dentists, and advisers engaged in the new state produce dated, located records supporting the new fixed place of habitation.
Congregations, clubs, and civic involvement relocated out of Alabama are dated evidence about where daily life is centered.
Where household goods, vehicles, and significant possessions went corroborates abandonment of the Alabama habitation.
The change year produces two Alabama returns: Form 40 as a resident covering the residence period with income from all sources, and Form 40NR as a nonresident covering Alabama-source income for the rest of the year.
Source ↗Employer withholding updated to the new state at the move date lines the payroll record up with the claimed domicile change.
Source ↗Every rule on this page traces to one of these. When a blog and a statute disagree, the statute wins — start here.
How these are chosen, what the automated gates catch, and what this site deliberately does not do: how these guides are made →
The year of the move is filed on Form 40, with income split between the resident and nonresident periods — and that return is itself evidence: it states your change date on a signed document. Under Act 2025-334 an employer has no Alabama withholding obligation for a qualifying nonresident employee working 30 or fewer days in the state during the calendar year; at 31 days the employer reports all Alabama-earned income.
There is no such number. Rule 810-3-2-.01 taxes those domiciled in Alabama on their entire income regardless of physical presence during the year, so days out of state do not end residency by themselves. What ends it is a new domicile established elsewhere coupled with abandonment of the Alabama one — presence plus intent, both shown by dated facts.
The taxpayer. The rule requires physical presence in the new jurisdiction plus intent to establish domicile there, coupled with abandonment of the old, and places the burden of proving a change on the person asserting it. Registrations, the disposition of the Alabama dwelling, and the county homestead record are the dated pieces.
Two of them. Form 40 covers the period of Alabama residence with income from all sources, and Form 40NR covers Alabama-source income for the nonresident portion of the year. The full standard deduction and exemptions are claimed on the part-year return, and none on the nonresident return.
Wages for personal services performed in Alabama stay Alabama-source for a nonresident. Act 2025-334 excludes an employee who works 30 or fewer days in the state during the calendar year, performs duties in more than one state, and lives in a state with a similar exclusion or no income tax; past 30 days, all Alabama-earned income for the year is taxable.
Social Security benefits, military retirement pay, United States Civil Service Retirement System benefits, Railroad Retirement benefits, and Alabama Teachers' and Employees' Retirement System benefits are exempt from Alabama income tax. Other income, including capital gains, is taxed under the 2%/4%/5% schedule.
Vehicles register within 30 days of entering the state under § 40-12-262, and the previous state's license works for 30 days after becoming a resident. Voter registration closes 15 days before an election. The homestead exemption is claimed at the county office, measured by ownership and occupancy on the first day of the tax year.
2026.1 Edition · Revised 2026-07-25 · DomusDay Research