Advantages of Living on the Road

rv_camper_at_north_toledo_bend_state_parkCome with me on a journey where taxes no longer apply.

Fifteen to twenty years ago I made it a mission to get people out of paying state taxes. Income taxes are the most obvious, but there are litanies of other taxes states levy against the people. Over the last few decades I estimate I cost the State of Wisconsin approximately $43 million in tax revenues. The richer you are the easier it is to avoid.

First I will tell a true story before I move to a tax strategy many of you early retirees will find very interesting.

Sometimes wealthy people wander into my office to pick my brain. This always amazes me because the pickings are rather slim at times. Still, it happens. On the particular day I have in mind one of the top people at a major financial firm stopped in. They were using a high powered firm in Chicago at the time so they thought an ‘ol farm boy from the sticks in Wisconsin could do better. And I did.

The issue revolved around retirement. They wanted to move to Wisconsin. When I reviewed their finances I explained why they did NOT want to move to Wisconsin. I showed them a number and they agreed. There was a solution, however.


They enjoyed summer weather in the Northwoods of Wisconsin. The problem was with their domicile. They only wanted to spend a few months of the summer here and the remainder of their time vacationing somewhere south. Making Wisconsin their domicile would be a very expensive move. My solution was simple: buy a home in Texas or Florida and make that their domicile.

51kzkwpxesl-_sx331_bo1204203200_Your domicile is your permanent residence or the place you intend to return to after an absence. My client wanted to spend some time in Wisconsin. Okay. They wanted to own a home here. Fine. But your domicile better be somewhere else. Take a look at the questionnaire Wisconsin requires residents to fill out when they leave. You have a better shot at escaping the Hotel California! No voting in Wisconsin. Get your driver’s license and auto license plates somewhere else. Thank god they didn’t like to fish or hunt. Once you are in the cult, I mean Wisconsin, you are not allowed to leave. They need your money. When a state works that hard to pick your pocket you know there is a reason.

My recommendation was simple. They wanted to spend eight to ten months a year elsewhere. Why not buy a home in a warm, low tax state like Texas and make that their domicile. Hell. Our governor takes more political contributions from Texas folks than Wisconsin folks. If it’s good enough for him; it’s good enough for my clients.

The result: They spent most of their time in Texas for years before moving to Florida. They summered in Wisconsin and visited their favorite accountant. The tax savings: The first year they saved enough in Wisconsin taxes to pay for the Texas home in cash. Not a bad deal. They eventually sold their Wisconsin home; property taxes here are out of this world too. They visit now and again and I have the honor of preparing their tax return each year. I did my job well serving my client and helped Madison lower taxes like they always say they want to.

Now for a road trip.

On the Road Again

Taxes are more about thought process than deductions. I am going to outline an idea that absolutely works for the right kind of person. Early retirees looking to travel more should find ample ways to tweak this program to benefit them.

It all boils down to your domicile again. Where do you call home? You want to think about that for a minute. If you want to spend time on the road, why have your legal residence in a high tax state. Even if you love Wisconsin (it is my home), there is no reason to make it your legal residence. Without ties to any state, ties mostly due to a job, you can choose what works best for you considering taxes.




States levy all sorts of fees and taxes. Taxes and fees to consider: income tax, sales and use tax, property tax, driver’s license and auto/RV license, personal property tax. There are other taxes and fees, but they tend to be minor compared to those listed.

Suppose you could pick which state you pay each tax in. You want your legal residence in a state without an income tax: Alaska, Nevada, Florida, South Dakota, Texas, Washington, and Wyoming. You want to buy stuff in states without a sales tax: Delaware, Montana, Oregon, and New Hampshire. You want to own a home in a state with low property taxes: Hawaii, Alabama, Louisiana, Delaware, D.C., South Carolina, West Virginia, Wyoming, Colorado, and Arkansas. There is little crossover (only Wyoming has low property taxes and no income tax) and not on all three taxes.

Once you reach retirement (or retirement at any age for that matter) you can pick and choose where you want to go. People who are on the road a lot traveling want a legal residence in a state with no income taxes and low sales taxes. The problem is each state picks and chooses which tax to hit residents with and which to lighten up on. No state is income and sales tax free. Alaska is close with no state wide sales tax, but local sales taxes make the state sales tax average 1.69% at the time of this writing.

Let me make a suggestion. Your mailing address does not have to be your legal residence. You also do not need to own or rent your domicile. Since you are retired you can buy an RV as your home. You could also use hotels and a car as your lifestyle (not my choice and it could get expensive). Over the years I have had clients buy an RV and travel the country, staying with friends and family for extended periods of time. You can use a drop box for your mailing address or a family member. Some people even use their accountant as their mailing address.

Replacing a $400,000 home (I know home prices vary greatly around the nation) with a $200,000 RV (guess you’ll be living well) could be a smart money move. Buy the RV in a state without a sales tax and register it in a state with low license fees; make an income tax free state your domicile/legal residence (where you return); and when you buy stuff do so in a state without a sales tax.

twinbedsI know I am oversimplifying this, but you should get the idea of where I am going. Properly structured you will pay no income or sales taxes. Other than federal income tax, what is left? A few minor fees apply. A bottle of whisky probably has state taxes added to the price. Many parks have fees to visit. These fees are minor compared income and sales tax.

If you have purchases of $20,000 in a year of sales taxable items, you save $1,000 in sales tax at 5%. Income taxes vary greatly between states, but $5,000 or more in state tax savings are almost a minimum unless your income is super low.

Road Rage

Mrs. Accountant cleaned the home of an elderly couple many years ago. Their daughter and her husband traveled the U.S. by RV. During the summer they would visit family in Wisconsin. (RVs are not ideal for living in during cold weather so they spent winters in warmer climates. They get nippy as the heaters only do so much.) After decades of living on the road they decided to settle down. They chose Texas. Go figure. Texas has high property taxes! Their high income made Texas a good choice, however, because they bought a small home to keep property taxes low and still traveled a bit with the RV.

Life on the road can be relaxing for some. After a while it might grow old. Travel becomes a job when you have no real place to call home. Nomadic living is not for everyone. That doesn’t mean you can’t take advantage of some of the differences in taxes between states.

Financial independence and early retirement make it easier to do. A job holds you down to one location usually. Some businesses can be run from anywhere. Bloggers and consultants can set up shop just about any place they want to. An RV is as good an office as any. They can keep more of their hard-earned money by planning where their legal residence is. Young children complicate the situation unless you home school. But think of the education the kids would get exploring the world on the road.

Owning a home has become prohibitively expensive in certain markets. Living out of a vehicle (van, RV, or other vehicle with some space) is cheaper than owning a home in parts of California and New York. Uber eliminates the need to bring a car along with the RV. By owning less stuff you automatically have fewer expenses and pay less in tax. Living on the road with a minimalist lifestyle, taxes become nothing more than background noise. While taxes may never be eliminated, those willing to live a different lifestyle can reduce their cost of living more by cutting the one expense that frequently takes more than all the other bills combined. Taxes.




Keith Schroeder

9 Comments

  1. Stephen Koinis on December 5, 2016 at 9:52 am

    How would the idea of use tax factor in here? Wouldn’t you ultimately have to pay the sale tax upon your tax filing?

    • Keith Schroeder on December 5, 2016 at 11:31 am

      Use tax could be an issue. Most stuff you use in a state with sales tax, you will buy the stuff there and pay sales tax. My goal was to show the extreme. Avoiding income tax is the easiest. Sales and use tax a bit harder and I suspect some would get paid unless you have your legal residence in a sales tax free states. But then there is income tax. I think living on the road with no home ownership avoids property and income tax. Planning should reduce sales/use tax. Good comment, Stephen.

  2. Gigi Griffis on December 5, 2016 at 2:25 pm

    What do you think of the retirees and early retirees who are bouncing around abroad instead of in the US?

    • Keith Schroeder on December 5, 2016 at 2:57 pm

      Gigi, I would want to have my domicile/legal residence in a no income tax state before I left. I assume no foreign earned income credit as you are retired and all income is from investments. Sales tax isn’t an issue if you are abroad, but GST might be a problem.

  3. Jason Kirkland on December 5, 2016 at 3:55 pm

    Great stuff. I own a RV and know a handful of people who live in them full time. As expected, TX, SD, and FL are popular domicile states due to taxes.

    The ACA and the individual mandate have thrown a wrench into things for people who aren’t old enough for medicare. Let’s just say that people wanting to try this strategy also need to consider where they will buy health insurance and if that insurance has much use when they’re away from the domicile state.

    I’ve heard from a few people in they past 2 years who are choosing a domicile as much for health insurance options as tax savings. I’d say many of them are healthy (no planned desire to use the health insurance) and not high income so the cost of insurance can overwhelm any tax savings.

    Something to think about….

    Thanks for sharing your thoughts via the blog.

    • Keith Schroeder on December 5, 2016 at 5:03 pm

      You know, Jason, that is one thing I did not consider. It is an important point to consider. Thanks for pointing it out. My guess is health insurance could be more an issue than state income taxes.

  4. TJ on December 13, 2016 at 12:21 am

    As I’m going to be spending most of 2017 on the road (via car and AirBNB), I’ve considered changing my domicile from California to something else, but my taxable income is most likely going to be so low next year that it’s probably cheaper to just stay domiciled here than to incur the costs to re-domicile somewhere else. I should spend more time researching it though.

    • Keith Schroeder on December 13, 2016 at 5:25 am

      That is the issue, TJ. Once you reach retirement the amount of cash needed to live is small and not all of it is taxable. Keep me informed of your adventure. It should make a great story. And never forget to just have fun.

  5. […] ________ and the cost of living is high. Hey, if rent is so darn high locally, why not buy a small RV and live out of it or pull a Mark Cuban. Just saying. Dump the car and bike or walk to that minimum wage job. Bend […]

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