January 18, 2022

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Moving Avoids California Tax? Not So Fast

Moving Avoids California Tax? Not So Fast

Why do you want to leave California? In California, the tax rate on ordinary income and capital gains is the same at 13.3%, but the top rate could rise to 16.8% under a pending tax bill. A wealth tax has even been proposed for California. Paying 13.3% in non-deductible state taxes (after the IRS $10,000 cap) is painful even without proposed hikes. It’s okay to leave for Nevada, Texas, Washington or other tax-free states, but if you’re not careful, you could be asked to keep paying California to Texas Movers taxes. If you’re living in California, you may still have to pay California taxes. The California Franchise Tax Board (FTB) can probe when and how you left the state, and it monitors the distinction between residents and non-residents. Your responsibility is to prove you do not live in California. Generally, if you’ve lived in California for more than nine months, you’re regarded as a resident, and more than six months is also considered a resident. The idea of moving seems easy, but if you aren’t careful, you could end up saying goodbye to the high taxes of California and hello to a residency audit. Knowing what to expect is crucial.

GETTY “Leaving California.” road sign.

Unlike the IRS, California can sometimes audit forever, even after 3 or 6 years. If you have never filed a tax return, California, like the IRS, allows you unlimited time. That’s why filing a California-source income tax return as a non-resident can make sense. When determining residency, California looks at objective factors. Time spent in California is weighed against time spent outside. To determine if you have closer ties to another state, California uses a comparative analysis. There are many people who leave California with unrealistic expectations. When it comes to tax disputes in California, procedure is very important. If California assesses taxes, it may do so regardless of where the taxpayer lives.

Take into account the size and value of your homes, as well as the location of the property on which you claimed the homeowner’s tax exemption. Where you received your driver’s license, how you registered your car, where you obtained your professional license, where you registered to vote, all count. Your bank’s location, doctor’s, dentist’s, accountant’s, church, temple or mosque’s location, etc., all matter. Which clubs do you belong to, and where? Whom do you know professionally and socially? Where does all your mail go?

  1. Turn in your California driver’s license and get a new one from another state.
  2. Your car(s) must be registered in your new state after you move.
  3. Re-register vehicles, notify California DMV, and move vehicles.
  4. The new state requires insurance for cars and real estate
  5. Join the new state’s voter registration process.
  6. Delete voter registration for old residence in California.
  7. Memberships in California clubs should be terminated.
  8. Get involved in clubs and social groups in the new state.
  9. Obtain a new state license and move the family there.
  10. Move cherished family heirlooms (photos, keepsakes, etc.) to home in the new state.Transfer family heirlooms (photos, keepsakes, etc.) to your new home.
  11. Any property in California should be sold, listed for sale, or leased (preferably a long-term lease).
  12. Leases of California properties should be terminated.
  13. Purchase or lease a residence in the new state. You should buy.
  14. Notify friends and family that you are leaving California permanently.
  15. Let banks, credit card companies, etc. know about your move and provide them with your new state address. Correspondence, such as bank statements, credit card statements, etc., should be sent to the new address.
  16. Consult healthcare providers and other advisors (except for advice regarding California taxation) in the new state.
  17. Send US Postal Service and IRS change of address forms.
  18. Notify all contacts of change of address and permanent move.Change of address and permanent move should be notified to all contacts.
  19. Get a new state phone number.
  20. From your new home, you can send holiday cards, birthday cards, and other correspondence.