Moving Avoids California Tax? Not So Fast(forbes.com)
forbes.com
Moving Avoids California Tax? Not So Fast
https://www.forbes.com/sites/robertwood/2021/07/12/moving-avoids-california-tax-not-so-fast
203 comments
I moved six years ago. I got demand letters from the CA tax board for four years after I left. I didn't owe them a dime but they still tried. Had to call and submit paperwork every time. At least the CA tax board people are super agreeable. It was annoying but less so because they were nice.
My partner lived and worked in CA in the early 2000's. Moved to NYC in 2004. Had zero ties to CA after that. Switched her driver's license, voter registration, filed and paid taxes in NY, owned and operated a company in NY, had no CA bank accounts or investments, never set foot back in the state. CA still would regularly come after her about every other year and make her go through the same process of calling and sending them paperwork to convince them that she didn't live there. Her bank accounts would get frozen for weeks at a time and she's paid lawyers thousands of dollars to clear it up. That continued regularly until 2014, when we moved abroad and she closed her US bank accounts. CA probably still thinks she's a resident but now there aren't any bank accounts for them to go after.
This Is One example that Freedom in USA Is a "flexible" concept expecially for the authorities
Do you know whether she filed the right partial-year CA tax filing for the year you moved? It almost sounds like she missed a step that would "close out" the CA tax records...
My wife and I moved overseas around the same time, filing one CA non-resident/partial year filing. In subsequent years, we only filed IRS returns with the foreign earned income exclusion, etc. and had no further issues. It was the other, ongoing treasury department reporting requirements that were a pain, not taxes per se. We eventually moved back and had another CA partial-year return to start things up again.
We even used a trusted relative's CA address as our mailing address for federal tax filings and US financial accounts we kept open while abroad. We did let our CA drivers licenses lapse while getting new ones overseas.
My wife and I moved overseas around the same time, filing one CA non-resident/partial year filing. In subsequent years, we only filed IRS returns with the foreign earned income exclusion, etc. and had no further issues. It was the other, ongoing treasury department reporting requirements that were a pain, not taxes per se. We eventually moved back and had another CA partial-year return to start things up again.
We even used a trusted relative's CA address as our mailing address for federal tax filings and US financial accounts we kept open while abroad. We did let our CA drivers licenses lapse while getting new ones overseas.
LA did the same thing to me for 6 years. They put me into collections at some point, which somehow never showed up on my credit report (thankfully), but every single year they'd harass me about taxes, and I'd need to fax them documentation.
Was the bank account opened in California? That may be the reason.
> Was the bank account opened in California? That may be the reason.
That shouldn't be a justification if the person doesn't actually live in the state anymore.
I have bank accounts in states I haven't lived for decades and that hasn't been any issue. Heck I even autodeposit my salary (from California) to my primary bank account in a different state, out of habit.
(It's good for credit rating to keep long-standing accounts open, so that's why I never close accounts if I move.)
That shouldn't be a justification if the person doesn't actually live in the state anymore.
I have bank accounts in states I haven't lived for decades and that hasn't been any issue. Heck I even autodeposit my salary (from California) to my primary bank account in a different state, out of habit.
(It's good for credit rating to keep long-standing accounts open, so that's why I never close accounts if I move.)
> had no CA bank accounts
This year was the last year I owed CA taxes. You still owe them on shares that vest that you earned when you were in CA. Looking forward to not filing taxes with them next year.
RSU's? Exercised options? My understanding is that you would pay taxes on shares sold. Shares not sold are not yet income. Taxes get paid when RSU's vest but that is usually done by your company on your behalf and the numbers will show up in your tax paperwork. A potential wealth tax may side step that however. Either way I let my tax lawyers figure all that out.
This isn't right. They are counted as income when they vest. They will appear on your W-2. When you sell them is not important for the purpose of income taxation.
Yeah I think the phrasing threw me off. There are taxes paid at the time of vesting of RSU's (vs options) but that is usually done by your employer before you even see the stock in your stock management accounts. The bigger and more ugly taxes come from selling off the stock.
Depends on how long you wait to sell, and if what happens to the asset price in the mean time. I sell all my shares the day after they vest or the same day. I pay basically zero net taxes on that action.
Do you know if this is true wrt options as well?
Not a tax expert but IIRC since they were earned in CA, they generally are taxed when they result in a net gain of some sort (e.g. sold directly or exercised). Go to Section E of the FTB's publication 1100.
urgh maybe I should talk to a tax expert. The section discusses NSOs but I have ISOs. I also don't know how it's impacted by the fact that the company I work for is based in Boston (options were granted after I moved to Cali though), and I'm mainly curious as to how it would be impacted if I move to an income-tax-free state before the options vest
FTB Pub 1004, Section D goes into ISOs in greater detail.
https://www.ftb.ca.gov/forms/misc/1004.html#D-Incentive-Stoc...
https://www.ftb.ca.gov/forms/misc/1004.html#D-Incentive-Stoc...
Same story here. I moved from CA to WA on Jan 4 of one year where that meant I worked a total of two days in CA for that calendar year and it took me at least 4 years of threatening letters and never-ending phone calls before they gave up their claim that I owed CA taxes for half that new year.
This throws me for a loop every time I interact with them. FTB folks on the phone are always very nice and helpful.
The fact that they're nice and polite in contrast with literally every other state agency who's taking your money is an indicator that they don't have a legal leg to stand on in many cases and don't want people digging in their heels and hiring a lawyer.
> For example, you might run into trouble if you're trying to work and live in Cali five months and thirty days a year without paying California taxes.
Like many states with income taxes, California taxes income earned in California by nonresidents, so if you work in California at all you will owe California taxes.
Like many states with income taxes, California taxes income earned in California by nonresidents, so if you work in California at all you will owe California taxes.
I didn't realize it worked that way until WFH. I guess it makes some sense but it's really annoying because despite being able to work from anywhere actually working outside your home state for any amount of time becomes really complicated really fast.
I remember this being publicized some years back when a Super Bowl was being held in California, and someone calculated that one team would have to pay California more in taxes for their presence in the state than they would themselves be paid for the privilege of losing the Super Bowl.
CA taxes the income for the time period you work in the state. They couldn't pay more in taxes than they earned. The amount they paid in taxes for CA was likely quite low, as their income during that time probably wouldn't come close to the top bracket for yearly income.
>States tax a player based on their calendar-year income. They apply a duty day calculation which takes the ratio of duty days within the state over total duty days for the year. That ratio is then multiplied by the player’s salary to arrive at a state’s allocable income.
https://www.forbes.com/sites/kurtbadenhausen/2016/02/03/cali...
https://www.forbes.com/sites/kurtbadenhausen/2016/02/03/cali...
This article is misleading, inaccurate, and reflects poorly on forbes. It's phrased as if they're paying that much tax on the superbowl winnings, but they're being taxed on their normal earnings, during the time they are in CA, which is the case for a number of states with income tax. The article also claims they're paying the top rate, without considering marginal taxes.
This is something I've always found interesting because many Americans snidely refer to tax cheats as, at best, one rung about the lowest form of criminal on earth. But then you find out they've been on a week long business trip to CA or did a bit of work on the laptop while on vacation in Europe and so themselves are evading taxes.
> been on a week long business trip to CA
I understand your point, but people who do this are still paying 100% of their federal income tax and 100% of the income tax for the state they reside in.
That gets complicated if you live in an income tax-free state. But it feels substantively different from the person who parks their money off-shore to pay no tax to anyone.
I understand your point, but people who do this are still paying 100% of their federal income tax and 100% of the income tax for the state they reside in.
That gets complicated if you live in an income tax-free state. But it feels substantively different from the person who parks their money off-shore to pay no tax to anyone.
I recall an investor friend who made a lot of money in the 1st dot com. He moved to nevada according to the law well before his windfall. CFTB hired private investigators to just follow and harass him constantly for almost two years while they tried and failed to assess him taxes he did not owe them.
It doesn't matter when your windfall happens. If you acquired stock while living in the state, you owe taxes on that when it becomes liquid. He owed those taxes.
CA FTB has an office in Reno for this very purpose.
The big one is if you still work for a company that only has Californian offices that requires you to visit for work. That's the leash a lot of tech workers will find hard to break.
Yes, being a frequent aerocommuter in an income tax state like CA is of limited use, when it comes to avoiding taxes. To me, this is a feature, not a bug. I don't want people causing massive pollution by flying back and forth to the office each week to avoid taxes. It's definitely not something that we should encourage.
Whew definitely don't look at Elon Musk's private jet usage in that case.
Count yourself lucky.
I’d say it was California that was behaving that way…unless you take the position that you can be a resident in multiple states…in which case you should be able to vote in multiple states, claim unemployment in multiple states, have driver’s licenses in both states etc.
I’d say it was California that was behaving that way…unless you take the position that you can be a resident in multiple states…in which case you should be able to vote in multiple states, claim unemployment in multiple states, have driver’s licenses in both states etc.
If they did request documentation, that would have been fine with me in any case. I had it, and it's reasonable for them to request it. They do have a legitimate interest in preventing and prosecuting tax fraud.
> If you actually live elsewhere like a normal person and are only back in California occasionally for vacation, you're at little risk of being audited and even less risk of being assessed taxes.
It seems simple but in practice often is not for anyone that has enough money for the state to care about.
I know many people who moved out and California was aggressively after them for years even though they fully moved and lived elsewhere and had sold away every last scrap of property they had in CA to avoid having any connection.
It seems simple but in practice often is not for anyone that has enough money for the state to care about.
I know many people who moved out and California was aggressively after them for years even though they fully moved and lived elsewhere and had sold away every last scrap of property they had in CA to avoid having any connection.
I have several neighbors who have fled California (smart bastards), and they knew to make it a very clean break. First get an apartment in another state; move bank accounts to new "state" bank in new state; get a new driver's license in that state; ensure employment address and all "official" addresses are changed, along with any and all other correspondence that's possible; sell house and/or car -- leave, leave, leave. Any reason they can find to make any association to the state, they will; and, like TFA says, the burden is on YOU to prove you DON'T live here.
These are all things you should be doing anyway if you're moving so it's not a particularly high bar to meet.
And as with most things, the burden is on you to the extent that you want to actually prove them wrong. If you don't find yourself going back to California and you're willing to get a nasty letter from them every now and then, it's really a non-issue even if they firmly believe you are/were a California resident. They can't lien property outside of the state. If they put something on your credit report, you can dispute it with the reporting agency (who are much more likely to be reasonable than some FTB bureaucrat). Yes it can be a pain in the ass but I don't think it's nearly as big of a hurdle as TFA is making it out to be.
And as with most things, the burden is on you to the extent that you want to actually prove them wrong. If you don't find yourself going back to California and you're willing to get a nasty letter from them every now and then, it's really a non-issue even if they firmly believe you are/were a California resident. They can't lien property outside of the state. If they put something on your credit report, you can dispute it with the reporting agency (who are much more likely to be reasonable than some FTB bureaucrat). Yes it can be a pain in the ass but I don't think it's nearly as big of a hurdle as TFA is making it out to be.
There is no reason one should need to move their back account. Especially with how big the biggest banks are nowadays.
That's definitely some IANAL advice that should be supercede by one's lawyers advice. For example, it's well known for those moving to Puerto Rico under Act 20/22 that the safest bet in case you would ever get audited is to close your USA bank accounts to cleanly sever the connection. This applies even if you get new ones from Puerto Rican branches of the same. Once you're being audited, all of these factors are plugged into the formula and this is definitely is one of the factors used in determining if you are still substantially connected to the United States.
The IRS also looks at if you have joined a church or other social organization in PR. That's a rough one for me if I get audited. While I didn't end up going to PR, I left the country two years ago and during an audit I would not fare well not being able to point to any social organizations, relationships with the opposite gender, or friendships I have overseas even though lawyers suggest setting all of these up. I'm not that social so I'm at risk and hope I don't face an audit. (Covid was a big factor in avoiding social contact too.)
Although all the about is IRS related, I think it's well established that states often work with the IRS procedures as inspiration for their own
The IRS also looks at if you have joined a church or other social organization in PR. That's a rough one for me if I get audited. While I didn't end up going to PR, I left the country two years ago and during an audit I would not fare well not being able to point to any social organizations, relationships with the opposite gender, or friendships I have overseas even though lawyers suggest setting all of these up. I'm not that social so I'm at risk and hope I don't face an audit. (Covid was a big factor in avoiding social contact too.)
Although all the about is IRS related, I think it's well established that states often work with the IRS procedures as inspiration for their own
> moving to Puerto Rico under Act 20/22
That's quite out of scope of the California thread though, as it is a much more complex situation. Income in PR is not subject to US taxation (even federal) so it's quite unlike moving in or out of a state like California.
That's quite out of scope of the California thread though, as it is a much more complex situation. Income in PR is not subject to US taxation (even federal) so it's quite unlike moving in or out of a state like California.
Just saying the evidence the IRS wants that you are a bona fide resident of PR is in many cases identical to what a state auditing you wants to see to prove you live in another state legitimately.
Substantial connection tests and such
Substantial connection tests and such
I agree that no one should have to do this, but just to make it more obvious I moved, I am going to close my accounts and get an account with a bank that is not based out of California. [1] It's probably time to do this anyway, my bank has been in the news repeatedly and not for nice things.
[1] - https://en.wikipedia.org/wiki/Category:Banks_based_in_Califo...
[1] - https://en.wikipedia.org/wiki/Category:Banks_based_in_Califo...
> These are all things you should be doing anyway if you're moving so it's not a particularly high bar to meet.
Not really. There's no legitimate reason one would have to sell all property in a state when moving out, for example. I should be able to keep them as rental units as long as I legitimately live in some different state.
A friend had to even sell off some empty undeveloped land to fend off California taxes, even though there was no way he could be claimed to live there, it was just empty land!
Not really. There's no legitimate reason one would have to sell all property in a state when moving out, for example. I should be able to keep them as rental units as long as I legitimately live in some different state.
A friend had to even sell off some empty undeveloped land to fend off California taxes, even though there was no way he could be claimed to live there, it was just empty land!
If your bank is under the influence of CA it can still be a problem. Something to keep in mind.
I went to MIT long time ago and have an MIT credit union account. Am I a Massachusetts tax resident then? Or should I shut it down.
A long time ago sounds like you're well past the point of getting audited by the state of Massachusetts. So it might have made sense to be safe two or three years after the departure, it's unlikely they pop up on you now with an audit
Also register to vote in your state of residence, and vote.
Imagine you live in California and get a job that pays you $X salary plus equity vesting at 1000 shares per year.
After a year, you move out of California and continue at the same job.
In year 1, you'll pay California taxes on the 1000 shares that vested at the end of that year.
What about years 2, 3 and 4? You'd guess that you wouldn't pay any California taxes on those vest events. Because you 'earnt' those shares after you left CA.
Not so fast. Because you were living in CA when those 4000 shares were granted (on a 4 year vesting schedule), you'll pay taxes on these proportions of each vesting event:
Year 1: 100% (lived in CA since grant to vest date)
Year 2: 50% (lived in CA for half the time between grant and vest)
Year 3: 33%
Year 4: 25%
So, even though you lived in CA for only 25% of the time, you pay CA tax on over 50% of your shares.
After a year, you move out of California and continue at the same job.
In year 1, you'll pay California taxes on the 1000 shares that vested at the end of that year.
What about years 2, 3 and 4? You'd guess that you wouldn't pay any California taxes on those vest events. Because you 'earnt' those shares after you left CA.
Not so fast. Because you were living in CA when those 4000 shares were granted (on a 4 year vesting schedule), you'll pay taxes on these proportions of each vesting event:
Year 1: 100% (lived in CA since grant to vest date)
Year 2: 50% (lived in CA for half the time between grant and vest)
Year 3: 33%
Year 4: 25%
So, even though you lived in CA for only 25% of the time, you pay CA tax on over 50% of your shares.
Having spoken to a tax accountant on this, i was told that (1) CA will try to claim this, (2) no state will extradite to CA you over this as they don't recognize it, so (3) at most you just cannot ever go to CA, nothing else will happen to you, if you refuse to pay.
Well I could imagine having outstanding warrants is going to get flagged on a background check.
Got a source for that? I can say with confidence that I personally know dozens of people who have moved out of state with granted but unvested RSUs from their companies and exactly 0 have paid any taxes to California for them.
My employer withheld California tax on restricted stock grants for me exactly as described here when I moved out of California years ago.
Other states even have forms for you to submit this calculation to them, see for example New York's IT203-F Schedule B. But you still have to apportion the income between states like this whether there's a form to do it on or not.
Other states even have forms for you to submit this calculation to them, see for example New York's IT203-F Schedule B. But you still have to apportion the income between states like this whether there's a form to do it on or not.
I can say with confidence that the people you personally know are committing tax fraud.
Again, provide a source for that confidence.
My FAANG employer and my CPA both agree I owe tax on RSUs that “partially vested” while a resident. An example of 48 shares of RSUs that vest 1/48 every month for 4 years (48 months), and I lived in CA for 6 months after they were granted (not vested, granted). In months 1-6, all were 100% California taxable. In month 7, I owed 6/7ths of the normal California tax. In month 8, it was 6/8ths. In month 48, the final vest, will be taxed by California at 6/48ths of a full resident. My new state also taxes them, but I can deduct taxes I pay to California so I don’t get double-taxes.
You might want to double check your confidence - unless I’m reading it horribly wrong, Investopedia supports the previous post, not yours.
[0] - https://www.investopedia.com/articles/tax/09/restricted-stoc...
[0] - https://www.investopedia.com/articles/tax/09/restricted-stoc...
If you want to know about California tax law, and you have three options:
A) An article on Investopedia, that has a section about taxes in general, but not about California tax in particular.
B) A comment from someone on HN talking specifically about California tax law.
C) A publication by the California Franchise Tax Board.
Which would you pick?
If you chose B, check out my earlier comment.
If you chose C, check out https://www.ftb.ca.gov/forms/misc/1004.html
Not sure why you would choose A, as it's neither specific to California taxes, nor is it an authority.
A) An article on Investopedia, that has a section about taxes in general, but not about California tax in particular.
B) A comment from someone on HN talking specifically about California tax law.
C) A publication by the California Franchise Tax Board.
Which would you pick?
If you chose B, check out my earlier comment.
If you chose C, check out https://www.ftb.ca.gov/forms/misc/1004.html
Not sure why you would choose A, as it's neither specific to California taxes, nor is it an authority.
> If you want to know about California tax law, and you have three options:
This is missing the best and most appropriate option:
D) Consult with tax accountant/lawyer very familiar with California.
If non-trivial money is involved, anything else is playing with fire.
This is missing the best and most appropriate option:
D) Consult with tax accountant/lawyer very familiar with California.
If non-trivial money is involved, anything else is playing with fire.
Right, but that option would have been difficult to execute at 8pm on Monday, when I wrote my comment.
For RSUs, your link says "California will tax the wage income to the extent services were performed in California from the grant date to the vesting date."
Where did you get the 33%/25% for years 3 & 4?
Where did you get the 33%/25% for years 3 & 4?
1 year in Cali out of 3 years after grant before vest = 33%
1 year in Cali out of 4 years after grant before vest = 25%
1 year in Cali out of 4 years after grant before vest = 25%
pc86(1)
This sounds well informed: https://www.upstartwealth.com/blog/will-you-owe-ca-tax-after...
If I'm reading it right, I should move the hell out of CA as fast as possible and skip waiting until next year as planned.
If I'm reading it right, I should move the hell out of CA as fast as possible and skip waiting until next year as planned.
Thanks for the link. This was helpful.
I wouldn't get tax advice from random people on the internet. If you make above a certain amount of income, and if you have stock options you likely are, it is worth your while to hire a CPA to do your taxes and get tax advice from.
It might sound expensive, but the alternative is worse. Consider a friend of mine during the 1999 stock bubble who had stock options. The bubble burst, and he owed taxes on the bubble amount, even though he never sold the stock. He was bankrupted, lost his house, and moved in with his family to a trailer. He had no idea about the tax consequences of his options.
It might sound expensive, but the alternative is worse. Consider a friend of mine during the 1999 stock bubble who had stock options. The bubble burst, and he owed taxes on the bubble amount, even though he never sold the stock. He was bankrupted, lost his house, and moved in with his family to a trailer. He had no idea about the tax consequences of his options.
https://www.ftb.ca.gov/forms/misc/1004.html
Search for the phrase 'one reasonable method'.
To me, in the contrived example I outlined, it seems reasonable to pay CA tax only on the first year's vest. But, from reading the linked page, I'm not sure whether the CA tax authorities could be made to see it the same way.
Of course, your friends are free to declare and pay taxes as they see fit, given their understanding of the law, their risk tolerance etc.
Search for the phrase 'one reasonable method'.
To me, in the contrived example I outlined, it seems reasonable to pay CA tax only on the first year's vest. But, from reading the linked page, I'm not sure whether the CA tax authorities could be made to see it the same way.
Of course, your friends are free to declare and pay taxes as they see fit, given their understanding of the law, their risk tolerance etc.
Most of that page deals with ISOs and NSOs, which are very different from the case you described. The section "E. Restricted Stock" is itself about Restricted Stock Awards (RSAs) NOT Restricted Stock Units (RSUs), the latter of which is what I imagine most non-executives reading this are getting. In case of RSAs you actually "own" the stock during the vesting period (including having voting rights), so it makes some sense to be taxed on it for that period.
See https://carta.com/blog/breaking-down-rsas-and-rsus/.
See https://carta.com/blog/breaking-down-rsas-and-rsus/.
It's unclear whether RSUs are covered by section E:
- RSUs are a type of restricted stock, which suggests that they would be covered by section E. (supporting my earlier assumption.)
- The examples in section E talk about 'purchase date' instead of 'grant date', suggesting they're talking about RSAs. (supporting your point.)
However: RSUs must be covered by that publication somehow. If they're not covered by section E, then which section covers them?
- RSUs are a type of restricted stock, which suggests that they would be covered by section E. (supporting my earlier assumption.)
- The examples in section E talk about 'purchase date' instead of 'grant date', suggesting they're talking about RSAs. (supporting your point.)
However: RSUs must be covered by that publication somehow. If they're not covered by section E, then which section covers them?
RSUs are, I imagine, not covered by this page because – unlike ISO/NSO/RSAs – RSU vesting schedules are simply a vague promise by the employer and not something legally binding or formally recognized by tax authorities.
You may be right on the latter. Not sure I agree with the former. They're usually on the offer letter or employment contract.
This is similar in vein to GDPR (hear me out) - not in content of course but in the general thought process (ideology?) of those behind it.
California is free to make up whatever nonsense California wants to make up. It doesn't mean that anyone needs to recognize it or be bound by it if they're in California. Just as the GDPR doesn't actually have any authority over US companies that don't operate within the EU, if I'm not a resident of California, California can say whatever it wants about my tax status but that's just not how it works in reality. No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't.
To my knowledge this hasn't been adjudicated to any court outside of California so whether or not it's legal in a broader sense remains to be seen. It's certainly possible, but until there's case law to support California taxing former residents on income earned/vested after California residency ended, it's fanciful.
California is free to make up whatever nonsense California wants to make up. It doesn't mean that anyone needs to recognize it or be bound by it if they're in California. Just as the GDPR doesn't actually have any authority over US companies that don't operate within the EU, if I'm not a resident of California, California can say whatever it wants about my tax status but that's just not how it works in reality. No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't.
To my knowledge this hasn't been adjudicated to any court outside of California so whether or not it's legal in a broader sense remains to be seen. It's certainly possible, but until there's case law to support California taxing former residents on income earned/vested after California residency ended, it's fanciful.
> No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't.
There are a ton of people in the Northeast waiting for the courts to review why NY and MA are entitled to income tax from them even though they have not stepped foot in either state in 18 months.
The question is do you have enough time and money to fight it long enough in court while CA/NY/MA can lean on the employers and national banks to simply withhold the funds.
Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states.
https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
There are a ton of people in the Northeast waiting for the courts to review why NY and MA are entitled to income tax from them even though they have not stepped foot in either state in 18 months.
The question is do you have enough time and money to fight it long enough in court while CA/NY/MA can lean on the employers and national banks to simply withhold the funds.
Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states.
https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
You're right about the parallel. If you never again step foot in California, and have no assets in California, then perhaps there's no way for California to enforce their claim.
But, even if no other state would enforce California's claim, couldn't the FTB get a court judgement against you in California? And then enforce by nabbing you next time you pass through SFO, or by seizing any property you might have?
But, even if no other state would enforce California's claim, couldn't the FTB get a court judgement against you in California? And then enforce by nabbing you next time you pass through SFO, or by seizing any property you might have?
This is basically my understanding. Any income that could be connected to California will be subject to taxes. Or at least the FTB will try.
I know some folks who left the state and got a “taxes owed” notice from FTB. They replied with “i haven’t set foot in CA for 3 years, I don’t owe anything” and the FTB dropped it.
It’s basically the same as NY and NJ which does it’s best to get its pound of flesh.
I know some folks who left the state and got a “taxes owed” notice from FTB. They replied with “i haven’t set foot in CA for 3 years, I don’t owe anything” and the FTB dropped it.
It’s basically the same as NY and NJ which does it’s best to get its pound of flesh.
NY is currently forcing employers to withhold income tax for people in NJ who have not been in NY in the last 18 months. I know quite a few companies who told their employees they will not stop withholding NY taxes from their income, and the issue is currently making its way through the courts.
Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states.
https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states.
https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
Basically you can't claim to have left California if you (even inadvertently) still have significant legal ties to the state. And probably not at all if you spend 9 months a year there.
If you move, deliberately cut all official ties like license, voting registration, storage units, etc.
All of which makes sense: if you're moving these are things you should do anyway. It's likely that California is probably much more strict in chasing down these details because its high tax rate makes it attractive to have a legal residence in one state while mostly still operating out of CA.
If you move, deliberately cut all official ties like license, voting registration, storage units, etc.
All of which makes sense: if you're moving these are things you should do anyway. It's likely that California is probably much more strict in chasing down these details because its high tax rate makes it attractive to have a legal residence in one state while mostly still operating out of CA.
The California FTB is the most exhausting tax authority I've ever dealt with. I have a virtual mailbox in LA and made what I now know to be a tragic error in using it as my address for one single 1099 contract around seven years ago.
They sent me a tax demand notice, and despite repeatedly proving to them that not only was I not a California resident at the time but that I wasn't even resident in the United States at the time, they're still after me for their ~$50.
I refuse to pay it on principle, so I've just resigned myself to the knowledge that I'll get a letter from them every spring until either I die or California secedes.
They sent me a tax demand notice, and despite repeatedly proving to them that not only was I not a California resident at the time but that I wasn't even resident in the United States at the time, they're still after me for their ~$50.
I refuse to pay it on principle, so I've just resigned myself to the knowledge that I'll get a letter from them every spring until either I die or California secedes.
You should listen to Mike Birbiglia's "My Girlfriend's Boyfriend." In it he tells a story about how he's T-boned by a drunk driver, but due to paperwork issues, he's on the hook for the damages to his rental car. It becomes an obsession for him, until his girlfriend makes him realize that being right is not as important as being happy, and he just lets it go and pays to make it go away and stop sucking his happiness out of his life.
> I refuse to pay it on principle, so I've just resigned myself to the knowledge that I'll get a letter from them every spring until I die or California secedes.
Why would California seceding have any effect?
Why would California seceding have any effect?
A crater can't collect taxes, maybe?
So to escape the evil tax board after moving out of California you have to...do normal stuff that you are legally required or otherwise expected to do as a resident of a new state/city — like switching your drivers license, registering your cars, registering to vote, making your address change official, not spending >9 months of the year "visiting" California.
Yes some well-intentioned people unfortunately get caught in this mess at times, but a far greater number are those who worked for a SV startup for years and conveniently moved to a no-tax state a month before IPO when all their stock became "real".
Yes some well-intentioned people unfortunately get caught in this mess at times, but a far greater number are those who worked for a SV startup for years and conveniently moved to a no-tax state a month before IPO when all their stock became "real".
I moved from California overseas.
I haven’t gotten rid of my state id as I would like an American one to use when I’m in the US.
I haven’t switched my voter registration (other than to say I’m overseas) as I have the legal right to vote at my last US address.
I haven’t switched my official address registration (not sure what that is, presume you mean via usps) as it is a pain internationally and someone living at my old address can still send me any mail (lots of services won’t even take a non-us address).
I don’t spend much time in California (less than a month so far in 2021) but I still have some income there.
I don’t think my situation is unique, I just worry that one day the franchise tax board will attempt to collect taxes which they don’t deserve (I live in a country with a higher tax rate than California, I don’t think I’m trying to avoid any taxes).
I haven’t gotten rid of my state id as I would like an American one to use when I’m in the US.
I haven’t switched my voter registration (other than to say I’m overseas) as I have the legal right to vote at my last US address.
I haven’t switched my official address registration (not sure what that is, presume you mean via usps) as it is a pain internationally and someone living at my old address can still send me any mail (lots of services won’t even take a non-us address).
I don’t spend much time in California (less than a month so far in 2021) but I still have some income there.
I don’t think my situation is unique, I just worry that one day the franchise tax board will attempt to collect taxes which they don’t deserve (I live in a country with a higher tax rate than California, I don’t think I’m trying to avoid any taxes).
I'm not American.
I moved from California to Hong Kong years ago.
Somehow, I'm still supposed to be filing tax returns in the US and in CA. It's absolutely bonkers.
I haven't stepped foot in the US in >18mo.
The USA won't let go of their hold on me, forcing me to pay taxes in a country and state I don't live, and refuses to consider me a non-resident unless I go through a complex process to renounce my green card, and give it a long buffer time.
It's absurd. I wish I could just tell them to shove it, but sadly I do need the ability to come back for the occasional work meeting and personal reasons.
I moved from California to Hong Kong years ago.
Somehow, I'm still supposed to be filing tax returns in the US and in CA. It's absolutely bonkers.
I haven't stepped foot in the US in >18mo.
The USA won't let go of their hold on me, forcing me to pay taxes in a country and state I don't live, and refuses to consider me a non-resident unless I go through a complex process to renounce my green card, and give it a long buffer time.
It's absurd. I wish I could just tell them to shove it, but sadly I do need the ability to come back for the occasional work meeting and personal reasons.
Your passport is a valid US ID.
You can vote nationally, but if you are no longer a California resident, you can't vote for any parts of the state elections.
Get a virtual mailbox, ideally in another state (like Washington, Texas, etc).
If you have California income, you still owe them taxes, but need to file as a non-resident.
Your situation isn't unique, but you're not approaching this correctly if you want to avoid taxes. I'm in your situation, but did a bit of research and put in the effort to do this in a way that makes it way less likely I'll be audited by CA.
You can vote nationally, but if you are no longer a California resident, you can't vote for any parts of the state elections.
Get a virtual mailbox, ideally in another state (like Washington, Texas, etc).
If you have California income, you still owe them taxes, but need to file as a non-resident.
Your situation isn't unique, but you're not approaching this correctly if you want to avoid taxes. I'm in your situation, but did a bit of research and put in the effort to do this in a way that makes it way less likely I'll be audited by CA.
I was in a similar boat a decade ago. I read the FTB documentation (FTB 1031 Sect. E-L) carefully and just accepted it would be subjective criteria test in court if it ever came down to it. I started keeping immaculate records (motivated by the IRS' substantial presence test or bona fide residence test depending on the year and where the family was in terms of which country it was in — e.g., moving to another). The main points that were relevant — memory serves — were a permanent work contract in the new country and having dissolved housing contracts and similar in CA. My advice: if going abroad, aim to promote your residency status in the new country to "permanent residency" (cf. Green Card, Niederlassungserlaubnis, Niederlassungsbewilligung) over just being permitted either temporary or long-term (cf. Aufenthaltserlaubnis, Kurzaufenthaltsbewilligung). It takes some work to earn permanent residency over the others (e.g., being in good standing, language mastery, and ability to substantively demonstrate financial independence). The idea of earning permanent residency (in a place where it's difficult to earn it) and throwing it away to return to CA suddenly would probably appear preposterous in court in terms of FTB arguing that you're just away from CA temporarily.
I kept a US driver license out of convenience in CA. Never was a problem, though I transitioned it to another state where I had family ties and a mailing address hear later.
I kept my CA bank account out of practicality. It was the only bank I had dealt with out of about six in rapid succession that was supportive and friendly with my living abroad (e.g., power of attorney, wire transfers without being in-person).
Voter registration in CA is fine per Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA). You are entitled your vote; what will differ is whether the state grants you purely federal or also local voting rights. You get federal at a minimum. UOCAVA is a bit hand-wavy with the criteria, so I did transfer my voter registration to the other state where I had the license.
For the one year I was half-in California while also being abroad, I still filed taxes accordingly for that year for CA. IIRC, I might have even filed 0 in a CA FTB form for the next year.
So: in short, multiple years with "weak" bureaucratic carryover ties in CA without issue, but ultimately transferred all matters aside from bank account to a state with deeper ties (even if living abroad). Never an issue.
The real monster, which dates back to the US Civil War, is the need to pay and file taxes when domiciled abroad. You can then add FATCA on top of that as a cherry. The CA FTB is a dream compared to the IRS here. I’ve basically accepted that this situation won’t improve in my lifetime. Maybe my children’s.
I kept a US driver license out of convenience in CA. Never was a problem, though I transitioned it to another state where I had family ties and a mailing address hear later.
I kept my CA bank account out of practicality. It was the only bank I had dealt with out of about six in rapid succession that was supportive and friendly with my living abroad (e.g., power of attorney, wire transfers without being in-person).
Voter registration in CA is fine per Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA). You are entitled your vote; what will differ is whether the state grants you purely federal or also local voting rights. You get federal at a minimum. UOCAVA is a bit hand-wavy with the criteria, so I did transfer my voter registration to the other state where I had the license.
For the one year I was half-in California while also being abroad, I still filed taxes accordingly for that year for CA. IIRC, I might have even filed 0 in a CA FTB form for the next year.
So: in short, multiple years with "weak" bureaucratic carryover ties in CA without issue, but ultimately transferred all matters aside from bank account to a state with deeper ties (even if living abroad). Never an issue.
The real monster, which dates back to the US Civil War, is the need to pay and file taxes when domiciled abroad. You can then add FATCA on top of that as a cherry. The CA FTB is a dream compared to the IRS here. I’ve basically accepted that this situation won’t improve in my lifetime. Maybe my children’s.
This is my understanding as well. It's not that keeping a CA drivers license means you are a resident, it's just one (of many) factors the FTB will use to determine whether or not you are a resident.
If you can break major ties with CA (not earning income in the state, you don't have a home in the state, you spend less than 30 days a year in the state) and show substantial evidence of residency in another place (employment contract, primary residence, etc) then it's a bit cleaner.
If you can break major ties with CA (not earning income in the state, you don't have a home in the state, you spend less than 30 days a year in the state) and show substantial evidence of residency in another place (employment contract, primary residence, etc) then it's a bit cleaner.
I moved away from the UK over 10 years ago. I haven't:
* cancelled my UK driving licence
* cancelled my library card
* changed the address on all bank accounts
* cancelled my mobile phone contract
...
* cancelled my UK driving licence
* cancelled my library card
* changed the address on all bank accounts
* cancelled my mobile phone contract
...
It is not just moving out of State. California also requires former residents to pay taxes if they move to another country, even if you live overseas for the entire year. Before moving to another country, many people transfer their residency to a State that places no obligations on people that aren’t actually in the country.
> California also requires former residents to pay taxes if they move to another country
But so does the federal government, doesn't it?
But so does the federal government, doesn't it?
But California doesn’t have a tax treaty with other jurisdictions and doesn’t recognize the foreign earned income exclusion (first 100k is tax free federally). This means that even if you don’t owe anything federally (as you earned less than 100k and/or worked in a country with a tax treaty and can offset all your federal tax liabilities) you will still owe the state of California money.
BTW the Federal exception is impossibly narrow to ever meet the first year you are overseas: a date in February starting overseas is required (it's like 10.5 months WITHIN the calendar tax year - e.g. if you move overseas in March of the year, you SOL on the exemption).
Pretty much unlikely you'll qualify the first year. But after should be easy enough.
Pretty much unlikely you'll qualify the first year. But after should be easy enough.
That's not how the foreign earned income exclusion works. For example, if you meet the 330-day physical presence test using the 12 months between April 1, 2020 and March 31, 2021, you can qualify for a prorated amount of the FEIE.
https://www.irs.gov/publications/p54#en_US_2020_publink10004... https://www.irs.gov/publications/p54#idm140194641073648
https://www.irs.gov/publications/p54#en_US_2020_publink10004... https://www.irs.gov/publications/p54#idm140194641073648
Yes, but it's not really the same.
I benefit from being a U.S. citizen, namely passport, so there's at least some justification. Otherwise I'd be stateless, which is a nightmare classification to be.
I garner no benefits not being in the state vs another one. I suppose if I care local elections that's... it?
I benefit from being a U.S. citizen, namely passport, so there's at least some justification. Otherwise I'd be stateless, which is a nightmare classification to be.
I garner no benefits not being in the state vs another one. I suppose if I care local elections that's... it?
My understanding is that this is only if you intend to move back to the state of California. I don’t know how you go about proving that that isn’t the case if they ask though.
How do you transfer residency? Do you actually have to live there, or can you rent an AirBNB in Puerto Rico for a month?
Some States have residency programs specifically targeted at nomads and expats that do not have a fixed address in the country. You don’t have to live there, you just need to show up in person to do all of the usual paperwork to establish your citizenship in that State.
South Dakota is famous for this but a few other States are also popular. From the State’s perspective they are generating a bit of revenue from someone who otherwise consumes no resources, so it is a good deal for both parties.
South Dakota is famous for this but a few other States are also popular. From the State’s perspective they are generating a bit of revenue from someone who otherwise consumes no resources, so it is a good deal for both parties.
Can you do this after you've moved to the other country (ie just take a few days trip to ND and move your residence from CA to ND)?
You have to fulfill the residency requirements for state X while also not looking like you live in state Y.
Like another poster said, you can go to South Dakota for literally a day or two and fulfill their residency requirements, but that is not likely to be enough for tax purposes. You should be employed by a company registered in that state; you should have a physical mailing address in that state (e.g. a PMB); you should file a USPS change of address form listing your new mailing address as your official address and change your registered address with service providers like banks and telecom; you should avoid spending more than 182 days per year in any other state as another poster mentioned; etc.
Like another poster said, you can go to South Dakota for literally a day or two and fulfill their residency requirements, but that is not likely to be enough for tax purposes. You should be employed by a company registered in that state; you should have a physical mailing address in that state (e.g. a PMB); you should file a USPS change of address form listing your new mailing address as your official address and change your registered address with service providers like banks and telecom; you should avoid spending more than 182 days per year in any other state as another poster mentioned; etc.
> USPS change of address form listing your new mailing address
Is this a requirement?
I don't fill out COA forms anymore because the idiotic assholes at USPS hand out your new address to stalkers, harrassers, spammers that knew your old address
Is this a requirement?
I don't fill out COA forms anymore because the idiotic assholes at USPS hand out your new address to stalkers, harrassers, spammers that knew your old address
I'm not sure if its an absolute requirement, but remember you are trying to make it appear as if you have moved to that state and made it your state of residence. Not filing a change of address form looks strange without any other data in that context.
If you want to avoid people knowing your address, I would recommend using a "private mailbox" (PMB) service and making that your official address. This gives you an address that is recognized as a physical address by most services and USPS but basically functions as a mail proxy: they will receive your packages / letters and forward them to another address you provide them. If you are concerned about stalkers or other hostile people, you could have the PMB forward mail and packages to a P.O. Box or commercial mail receiving agency (UPS Store et al) which is not where you live. Escapees and America's Mailbox are examples of PMBs with receiving facilities in South Dakota.
If you want to avoid people knowing your address, I would recommend using a "private mailbox" (PMB) service and making that your official address. This gives you an address that is recognized as a physical address by most services and USPS but basically functions as a mail proxy: they will receive your packages / letters and forward them to another address you provide them. If you are concerned about stalkers or other hostile people, you could have the PMB forward mail and packages to a P.O. Box or commercial mail receiving agency (UPS Store et al) which is not where you live. Escapees and America's Mailbox are examples of PMBs with receiving facilities in South Dakota.
"There, a nonresident sole proprietor performed all of his services outside of California. However, some of his customers were located in California. Is that enough for the poor guy to attract California tax liability? The California taxing authorities said he was operating a "unitary" business. Therefore, his tiny business was subject to California's apportionment rules."
"The California Franchise Tax Board matched income records showing that he collected $40,000 of income from California companies. Not surprisingly, Bindley did not file a California tax return. That meant California’s statute of limitations would never start to run."
So should out-of-state freelancers avoid taking on any CA clients?
"The California Franchise Tax Board matched income records showing that he collected $40,000 of income from California companies. Not surprisingly, Bindley did not file a California tax return. That meant California’s statute of limitations would never start to run."
So should out-of-state freelancers avoid taking on any CA clients?
I know somebody in NYC who does exactly this. He refuses to take on any clients in California.
This isn’t because NY is a picnic but because it limits his headache to one state.
This isn’t because NY is a picnic but because it limits his headache to one state.
It sounds like the nature of his business was such that CA thought he didn't have "clients" (plural) but rather a single client spread out over multiple states.
Anyone know how 83(b) elections (aka "early exercise") works with Californian tax?
After the 83(b) election, if you fully vest all the early exercised shares in California, then move elsewhere for a year or more before selling, will California still tax the gains from that sale?
On the one hand, I'm vesting the exercised shares whilst in CA. On the other hand, I've early exercised, so there is no realized gains until I've sold. So if I leave CA, renounce all ties to CA as the article says, then sell, will CA come after me?
Is this analogous to buying a share of Google whilst a CA resident, then becoming a resident somewhere else and then selling that share of Google there? CA doesn't tax that... right?
After the 83(b) election, if you fully vest all the early exercised shares in California, then move elsewhere for a year or more before selling, will California still tax the gains from that sale?
On the one hand, I'm vesting the exercised shares whilst in CA. On the other hand, I've early exercised, so there is no realized gains until I've sold. So if I leave CA, renounce all ties to CA as the article says, then sell, will CA come after me?
Is this analogous to buying a share of Google whilst a CA resident, then becoming a resident somewhere else and then selling that share of Google there? CA doesn't tax that... right?
The answer is in FTB Pub 1004. It depends on whether you sell NSOs, ISOs in a qualifying disposition, or ISOs in a disqualifying disposition.
https://www.ftb.ca.gov/forms/misc/1004.html
https://www.ftb.ca.gov/forms/misc/1004.html
Since California has a reputation for it's high taxes on almost everything, I was surprised to learn their State budget is pretty average on a per capita basis [1].
[1] https://en.wikipedia.org/wiki/List_of_U.S._state_budgets
[1] https://en.wikipedia.org/wiki/List_of_U.S._state_budgets
It turns out California doesn’t really have that high of taxes. States like NY, NJ and MD have higher tax burdens.
I would expect the states with the highest debt per taxpayer to have the highest taxes, especially if you are in the top 40% of income:
https://www.truthinaccounting.org/news/detail/financial-stat...
The extreme outliers are CT/IL/NJ.
https://www.truthinaccounting.org/news/detail/financial-stat...
The extreme outliers are CT/IL/NJ.
Depends on how you measure "debt".
If you include cities that are essentially bankrupt in CA, it's very high. Most CA cities are unviable financially.
If you include cities that are essentially bankrupt in CA, it's very high. Most CA cities are unviable financially.
[deleted]
Could it be that CA receives less in federal aid per capita than the average state
I think its more likely that the state's rules on increasing property taxes hamstrung its ability to raise revenue through the increasing property values in the state. Instead they make up the difference through other means of taxation.
Those who work are subsidizing those who own property.
In states with no income taxes, it ends up being the opposite.
At least you all get a break. I live in a state with relatively high property taxes (1.5%), state income tax, local income tax (both where you work, and where you live, 1.5%), school district income tax (1.5%), state sales tax (6.5%), local sales tax(1-2%), and a whole slew of special interest sales taxes (professional sports stadiums).
This is a solidly red, "we hate taxes" state too. Sometimes I wonder if I would save on taxes by moving to CA.
At least you all get a break. I live in a state with relatively high property taxes (1.5%), state income tax, local income tax (both where you work, and where you live, 1.5%), school district income tax (1.5%), state sales tax (6.5%), local sales tax(1-2%), and a whole slew of special interest sales taxes (professional sports stadiums).
This is a solidly red, "we hate taxes" state too. Sometimes I wonder if I would save on taxes by moving to CA.
Those are not mutually exclusive sets. In fact, one is pretty close to a subset of the the other.
I invite you to try attaining home equity in California through labor. Vanishingly few people in the highest reaches of the state's most lucrative industry are able to do that.
These prices aren't made out of saved-up paychecks. Not even for white collar jobs. They are wealth. A group of people who were in the right place at the right time, trading amongst themselves. When an uppity little worker somehow makes enough to break into their club, they take it as a reminder about how that pesky income inequality really needs fixing. Turn up the taxes on wages until he goes away. But no more taxes on our ownership. That's out of the question.
These prices aren't made out of saved-up paychecks. Not even for white collar jobs. They are wealth. A group of people who were in the right place at the right time, trading amongst themselves. When an uppity little worker somehow makes enough to break into their club, they take it as a reminder about how that pesky income inequality really needs fixing. Turn up the taxes on wages until he goes away. But no more taxes on our ownership. That's out of the question.
The data do not agree with you.
55% of housing units are owned by their occupant in California[1]. That statistic is trending up.
There are estimated to be 13.3 million housing units in California[2]. This means 7.3 million of those units are owned by their occupant(s). The adult population (>=18yo) of California is estimated to be 24.9 million[3]. So if we assume all 7.3 million owner occupied housing units have a single owner-occupant, this would mean that approximately 29% of adult Californians own their residence. This, of course, is an underestimate because many homes are owned by more than one occupant (i.e. families).
Thus, at a minimum, 1/3rd of Californians are "attaining equity through labor". Are you telling me all of these people are the moneyed, flying-over-everything capital class?
Please fact check your defeatist attitude and consider widening your gaze as to the opportunities available to you. There is no free lunch. Sacrifices and compromises must be made to achieve your goals.
[1] https://fred.stlouisfed.org/series/CAHOWN
[2] https://www.census.gov/programs-surveys/ahs/data/interactive...
[3] https://censusreporter.org/profiles/04000US06-california/
55% of housing units are owned by their occupant in California[1]. That statistic is trending up.
There are estimated to be 13.3 million housing units in California[2]. This means 7.3 million of those units are owned by their occupant(s). The adult population (>=18yo) of California is estimated to be 24.9 million[3]. So if we assume all 7.3 million owner occupied housing units have a single owner-occupant, this would mean that approximately 29% of adult Californians own their residence. This, of course, is an underestimate because many homes are owned by more than one occupant (i.e. families).
Thus, at a minimum, 1/3rd of Californians are "attaining equity through labor". Are you telling me all of these people are the moneyed, flying-over-everything capital class?
Please fact check your defeatist attitude and consider widening your gaze as to the opportunities available to you. There is no free lunch. Sacrifices and compromises must be made to achieve your goals.
[1] https://fred.stlouisfed.org/series/CAHOWN
[2] https://www.census.gov/programs-surveys/ahs/data/interactive...
[3] https://censusreporter.org/profiles/04000US06-california/
The median home price is $818k [0]. That works out to about $3,400/month. To afford that you need to make $130k [1]. That is an 89th percentile wage locally [2]. And that's a single family home. In the cities for that price we're probably talking about a condo with a $500-$1000 monthly HOA.
The vast majority of the value in these homes is appreciation. Having more in appreciated asset value than 90% of your neighbors could ever catch up to through wages is exactly what defines the moneyed, flying-over-everything class.
I have a home in California, btw. I was able to stretch for a 1BR condo by earning half a million a year. That is definitely not what most other homeowners did, and it's not as if the people with 2BR and 3BR have even better salaries. They have wealth.
[0] https://www.nytimes.com/2021/06/29/realestate/california-hou...
[1] https://www.nerdwallet.com/mortgages/how-much-house-can-i-af...
[2] https://dqydj.com/income-percentile-by-state-calculator/
The vast majority of the value in these homes is appreciation. Having more in appreciated asset value than 90% of your neighbors could ever catch up to through wages is exactly what defines the moneyed, flying-over-everything class.
I have a home in California, btw. I was able to stretch for a 1BR condo by earning half a million a year. That is definitely not what most other homeowners did, and it's not as if the people with 2BR and 3BR have even better salaries. They have wealth.
[0] https://www.nytimes.com/2021/06/29/realestate/california-hou...
[1] https://www.nerdwallet.com/mortgages/how-much-house-can-i-af...
[2] https://dqydj.com/income-percentile-by-state-calculator/
Aren’t property taxes only paid to local municipalities?
Pretty sure it’s that way in NJ at any rate
Pretty sure it’s that way in NJ at any rate
It's complicated in CA. Yes, they stay local in the county and are meant to fund education. The caveat is that due to proposition 13 property taxes no longer are able to fund education completely and the state has to step in to cover the gap, so property taxes have a large impact on the state budget.
https://lao.ca.gov/reports/2012/tax/property-tax-primer-1129...
https://lao.ca.gov/reports/2012/tax/property-tax-primer-1129...
California ranks 8th when state and local taxes are taken into account
https://www.taxpolicycenter.org/statistics/rankings-state-an...
https://www.taxpolicycenter.org/statistics/rankings-state-an...
It is pretty useless to have a single ranking for tax rates when people of various incomes have various tax rates. This report gives a better idea for an individual’s tax rate based on income, although it does not take into account personal circumstances due to prop 13 in CA:
https://itep.org/whopays-map/
https://itep.org/whopays-map/
I think both are relevant. States have many differences and more or less progressive structures, but average revenue/spend tells an important part of the story.
If a state (e.g. California) is collecting and spending 50% than average on a per capita basis, it begs the question of what that money is spent on, and if there are diminishing returns in value.
If a state (e.g. California) is collecting and spending 50% than average on a per capita basis, it begs the question of what that money is spent on, and if there are diminishing returns in value.
It depends what income band you are in (and what type of income you have):
https://itep.org/whopays-map/
And specifically for CA, what land you have passed down to you so you can benefit from prop 13.
https://itep.org/whopays-map/
And specifically for CA, what land you have passed down to you so you can benefit from prop 13.
That's the state budget which can be financed by resources (ie: oil), loans or federal aid. The budget for Qatar is certainly not 0 because they have no income/capital/sales taxes.
I'm surprised North Dakota is top of the per capita list. A few others are very high, Alaska, Wyoming?
Is it industry taxes? Another method of income?
Is it industry taxes? Another method of income?
> “19. Obtain new state phone numbers.”
HA! I had to laugh when I saw this. I’d love to see this argued in tax court in the modern day. It would be hysterical.
HA! I had to laugh when I saw this. I’d love to see this argued in tax court in the modern day. It would be hysterical.
That's such a massive burden anymore, since so many services tie 2FA to phone numbers for some dumbass reason.
Why is California taxes so high anyways? I feel they add up with the federal taxes to as high as in Canada, except that you don't get almost free education, subsidized child care, free health care, free meds, and year long parental leave.
Depending on how you count, California has about the 10th highest total tax burden among US states. But in terms of educational achievement and government services we're certainly not getting our money worth. The state government is now largely controlled by public employee unions who treat it as a cash cow.
They're so high because property tax is grossly unfair there. There are people with $10m homes paying taxes as if valued closer to $100k.
It is funny, CA actually has very progressive taxes…except prop 13 creating this giant loophole for land wealth where the older landowners are grandfathered into a highly regressive property tax.
https://itep.org/whopays-map/
https://itep.org/whopays-map/
No free meds in Canada. Well, not for most people. And no dental care coverage either. Just doctor/hospital care.
Education isn't almost free. Annual tuition is $7k-$8k CAD ($6.5kish USD) a year.
And subsidized child care is... dicey. Depends on province, etc. and unlikely to find availability.
As for parental leave, could you live on $595 CAD ($472 USD) a week? That's the maximum... Not ideal in the Toronto area where the average for a 1 bedroom apartment is around $2000 CAD a month. It certainly helps a lot when you have a working spouse, but it's not enough to raise a child on your own.
It's not a worker's paradise up here. It's better than it could be though.
As for parental leave, could you live on $595 CAD ($472 USD) a week? That's the maximum... Not ideal in the Toronto area where the average for a 1 bedroom apartment is around $2000 CAD a month. It certainly helps a lot when you have a working spouse, but it's not enough to raise a child on your own.
It's not a worker's paradise up here. It's better than it could be though.
Well, meds while in hospital are free, and otherwise they are much cheaper or offered for free to qualified individuals. So they're either cheap or free.
I'd consider that almost free education haha, but also I'm from Quebec, so the average is 3k per year for tuition (also why can't other province follow suit here). In any case, it's far away from a 60k tuition you can get in the US. You won't really see anything above 16k per year in Canada even for med school at the best university.
I'm also from Quebec, so for childcare you get 7$ per day, but yes it can be hard to find availability.
Honestly, I'd be happy with unpaid parental leave even, but off course I'm an engineer, so I can afford it. I think a lot of parents can afford having one at home with 500$ a month and the other working. So it's still a pretty big perk.
> It's not a worker's paradise up here. It's better than it could be though
I think that's slightly off topic, California has way better jobs for engineers, that's why I'm no longer in Canada. But job availability and pay is kind of orthogonal to taxes (unless you'd tell me the tax money goes towards attracting higher paying jobs to the state).
So the question remains, where the hell does the tax money go here? And why can't they offer as many services when the taxes are just as high, especially considering the state is way richer than any province in Canada, it seems they could afford to offer even more services than in Quebec for all that money.
I'd consider that almost free education haha, but also I'm from Quebec, so the average is 3k per year for tuition (also why can't other province follow suit here). In any case, it's far away from a 60k tuition you can get in the US. You won't really see anything above 16k per year in Canada even for med school at the best university.
I'm also from Quebec, so for childcare you get 7$ per day, but yes it can be hard to find availability.
Honestly, I'd be happy with unpaid parental leave even, but off course I'm an engineer, so I can afford it. I think a lot of parents can afford having one at home with 500$ a month and the other working. So it's still a pretty big perk.
> It's not a worker's paradise up here. It's better than it could be though
I think that's slightly off topic, California has way better jobs for engineers, that's why I'm no longer in Canada. But job availability and pay is kind of orthogonal to taxes (unless you'd tell me the tax money goes towards attracting higher paying jobs to the state).
So the question remains, where the hell does the tax money go here? And why can't they offer as many services when the taxes are just as high, especially considering the state is way richer than any province in Canada, it seems they could afford to offer even more services than in Quebec for all that money.
I always wondered where these $2,000 a month renters look. You can get a house for amount.
You can't get a house in Toronto area with a $2000 a month mortgage. Average home price is $1M and higher now, which is over $4000 a month in payments unless you have a very substantial downpayment.
Renting.. outside of the downtown core.
For people living paycheck to paycheck, I assume they likely don't have the down payment for a house.
Unless you're referring to renting a house I suppose.
Unless you're referring to renting a house I suppose.
I had an interesting experience with FTB... I returned to WA without changing jobs, after working in CA and getting some ISOs. The way it works is that you separate the income from the ISOs that don't meet holding reqs proportionally between certain dates. I.e. you pay CA taxes on the fraction of "wage" income earned in CA vs another state; and no CA taxes on the other portion, attributable to that other state. However, there's no form for that; so, for a few years I'd do the math in Excel, and then send FTB a form that looks like "here's my total income, and I pinkie swear this (much smaller) random-looking number is my CA income".
What's interesting is sometimes I was too lazy to do proper math for some small sale transactions that were few days apart, so I'd round it in favor of FTB. And every year FTB would charge me as expected, and then send me a check for $20, $50 or whatever, presumably because of that.
In short, I'm pretty sure FTB knows everything about you and your CA taxes :)
Also based on reading the publications myself (disclaimer: IANAL), I'm pretty sure unless you actually work/live in CA, or have delayed income based in CA, you are not generally supposed to pay CA taxes.
What's interesting is sometimes I was too lazy to do proper math for some small sale transactions that were few days apart, so I'd round it in favor of FTB. And every year FTB would charge me as expected, and then send me a check for $20, $50 or whatever, presumably because of that.
In short, I'm pretty sure FTB knows everything about you and your CA taxes :)
Also based on reading the publications myself (disclaimer: IANAL), I'm pretty sure unless you actually work/live in CA, or have delayed income based in CA, you are not generally supposed to pay CA taxes.
It just shows what a mess US taxation is. I am in Australia and we have a single federal income tax and GST and I am glad for that.
You can check-out any time you like, but you can never leave.
As a non-American who lived in 6 countries and dealed with different tax offices in Asia/Pacific/Europe, the system sounds absolutely ridicilous to me.
As an American living in London, you'd be correct, it's simply ridicilous.
It’s almost as if your government wants to punish you for living abroad.
On the plus side, America accepts dual citizenship and Germany(where I’m from) accepts not, unless I apply for a special permit to retain German citizenship before acquiring another citizenship.
On the plus side, America accepts dual citizenship and Germany(where I’m from) accepts not, unless I apply for a special permit to retain German citizenship before acquiring another citizenship.
I love the list of recommendations, including:
> Notify friends and family of permanent move out of California
Make sure to send it certified mail, return receipt requested and save the records!
> Notify friends and family of permanent move out of California
Make sure to send it certified mail, return receipt requested and save the records!
I left California 2 years ago, and I still have 2 years of taxes to pay on RSUs granted while a resident.
CA is particularly bad but I've seen this from smaller states as well. I went to grad-school in PA (CMU). After graduating and moving out of PA, a couple years later PA demanded taxes on income I only earned after leaving the state.
It amounted to only like $40 and I was afraid it'd cost way more to fight so I just paid it, even though it was a completly fabricated tax bill. Today I'd fight it just on principle but I was too poor then and couldn't afford to talk to a CPA or lawyer.
It amounted to only like $40 and I was afraid it'd cost way more to fight so I just paid it, even though it was a completly fabricated tax bill. Today I'd fight it just on principle but I was too poor then and couldn't afford to talk to a CPA or lawyer.
What if a hypothetical person moves to Reno, for real, buying a house etc, and continue to work remotely for their small SF based employer?
Does it help that the employer has offices in 2 other states?
Does it help that the employer has offices in 2 other states?
If your employer (W2) is in CA you pay CA income taxes.
Taxes are based on where the work is performed, not where your employer is located in all US states in aware of. So remote work solely out of your home in Reno, NV for a California company would have no state income taxes (since Nevada doesn't have state income tax).
There is a slight caveat currently if you were previously performing your work in a place that did tax:
https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
My tax attorney gave me a list similar to that, but it only had 19 items. I think the items I didn't see on the other list were birthday cards, clubs and social groups and heirlooms. They've had some clients get grief from the FTB but a phone call can sort it out. My attorney of course offered to do this for me. This is my last year in California so I guess I will find out how hard this is.
For years I have rejected _all_ contract and permanent jobs from CA for two reasons:
1. I don't enjoy filing state income tax(I'm a Texan) at all.
2. I have to get 13% higher pay comparing to what I earn in TX which CA-recruiters did not like it much at times. The 13% is to cover CA's state income tax.I don't know your situation so maybe this actually is an issue for you, but I feel like it's worth pointing out that the 13% tax bracket is only on income beyond $1 million/year
Amazing how many people do not understand marginal income taxes.
I don't do a ton of contract and I don't like CA taxes. But this seems slightly antagonistic. Hiring a CPA will make taxes easier, both of these can mainly be solved with more money.
Why are recruiters negotiating with you about whether or not 13% is a far increase for being in CA? To me it seems like the high end for comp in Silicon Valley is much higher than the high end for comp in Texas. And 10-20% salary adjustment for an internal move between a MCOL city and Silicon Valley seems normal.
I don't know your situation, but a 15% bump for working in CA sounds cheap in general.
Why are recruiters negotiating with you about whether or not 13% is a far increase for being in CA? To me it seems like the high end for comp in Silicon Valley is much higher than the high end for comp in Texas. And 10-20% salary adjustment for an internal move between a MCOL city and Silicon Valley seems normal.
I don't know your situation, but a 15% bump for working in CA sounds cheap in general.
You don't have to pay taxes in CA if you don't live there, even if a client is in CA.
Unless you're talking about doing on-site jobs.
Unless you're talking about doing on-site jobs.
Not quite sure what might have changed since, but 20 years ago I was doing on-site work in New York, but my primary residence was still in Texas (I flew in every Sunday night, stayed in a hotel, and back every Friday) and still didn't owe any New York state taxes because I didn't actually reside there.
Not true if you get paid on a 1099 since 2019.
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Treat your citizens like cattle, not like pets. I cannot remember where I read this, but it kind of makes sense.
swiley(4)
New York is similar, a naked cash grabs, to support unsustainable and irresponsible fiscal policies.
Oregon as well.
> You can leave for Nevada, Texas, Washington or other no-tax states,
Not anymore. Washington now has a 7% capital gains tax.
Not anymore. Washington now has a 7% capital gains tax.
WA now has a 1% income tax for W2 income in the form of 0.4% for family leave/sick leave/parental leave and 0.6% for long term care insurance (which is effectively a marginal income tax considering the state LTC insurance benefits are pathetic).
They also snuck in a way for current residents to get out of paying the 0.6% LTC tax if you were heads up enough about already getting LTC insurance earlier this year, but anyone moving here after Oct 2021 is screwed.
They also snuck in a way for current residents to get out of paying the 0.6% LTC tax if you were heads up enough about already getting LTC insurance earlier this year, but anyone moving here after Oct 2021 is screwed.
Yeah LTC is a scam. I wish the courts would strike it down
WA taxes capital gains profits which exceed $250k annually. The rate is also less than you'd likely pay in CA(max 13%?). Not great, but better than CA.
The thing that gets me about WA are the insane liquor taxes(and higher base prices as well for some reason). OR isn't too far away though, and they seem to have reasonable prices despite the state liquor monopoly.
The thing that gets me about WA are the insane liquor taxes(and higher base prices as well for some reason). OR isn't too far away though, and they seem to have reasonable prices despite the state liquor monopoly.
Starting next year yes
Although state income/capital tax is not deductible right now, after the $10,000 cap, you can still lower your AGI to zero or negative from the usual concoctions, which leaves nothing to tax, that way.
There are no usual concoctions that will get a normal high-income wage-earner to zero. If you have an unusual situation or are retired that's a separate issue, but even then it's not as easy as people make it sound.
Right, no use in talking about it, just let ProPublica “leak” tax techniques two decades late, per usual
Wage earners do have the worst circumstance. The slowest and highest taxed way of getting money and it has a general ceiling. And they don’t have access to half of their earned capital that year to even attempt doing anything with it, Yuck. There is still a lot they can do.
Wage earners do have the worst circumstance. The slowest and highest taxed way of getting money and it has a general ceiling. And they don’t have access to half of their earned capital that year to even attempt doing anything with it, Yuck. There is still a lot they can do.
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What this crazy blog post ignores is that if you move away you lose all the benefits of living in California.
Sure, you want to move and do so (or don’t want to but have to for some reason). You’re fine.
This whole post is about wanting to get the benefits of being in california (9 months a year wtf) but not pay for it.
And in the end, california taxes overall…are pretty average.
Sure, you want to move and do so (or don’t want to but have to for some reason). You’re fine.
This whole post is about wanting to get the benefits of being in california (9 months a year wtf) but not pay for it.
And in the end, california taxes overall…are pretty average.
> And in the end, california taxes overall…are pretty average.
Err, no - no they aren’t. By most accounts, it’s the highest or in the top 2-3 in the nation, and not by a little.
California has the highest income tax, the highest capital gains tax, and the highest state sales tax. The only common tax rate in CA that’s even close to average is property tax.
[1] https://worldpopulationreview.com/state-rankings/highest-tax...
Err, no - no they aren’t. By most accounts, it’s the highest or in the top 2-3 in the nation, and not by a little.
California has the highest income tax, the highest capital gains tax, and the highest state sales tax. The only common tax rate in CA that’s even close to average is property tax.
[1] https://worldpopulationreview.com/state-rankings/highest-tax...
It depends what income band you are in:
https://itep.org/whopays-map/
It is not useful to consider top tax rates for every state unless you are in the top tax rate income bands for every state.
https://itep.org/whopays-map/
It is not useful to consider top tax rates for every state unless you are in the top tax rate income bands for every state.
A tax that starts at 90% for low income people and ends up at 2000% for high net worth individuals would be the one of the most progressive tax systems imaginable and yet would be completely unaffordable. The average percentage of earnings paid to taxes and governmental fees would be a better judge of this but that I've never been able to find data like that.
A reasonable proxy is state expenditure per capita.
In the case of california, the state happens to collect a disproportionate amount from cap gains which helped in 2020 and caused a crisis in 2008. Also spending is higher per capita in the less densely settled (and predominantly Republican) portions of the state (most of it if you look at a political map) simply because the infrastructure is thinner and more critical and social services are more expensive to provide.
In the case of california, the state happens to collect a disproportionate amount from cap gains which helped in 2020 and caused a crisis in 2008. Also spending is higher per capita in the less densely settled (and predominantly Republican) portions of the state (most of it if you look at a political map) simply because the infrastructure is thinner and more critical and social services are more expensive to provide.
The benefits that many people enjoy in California are not provided by the government, eg climate and nature.
But this site is full of Bezos wannabes, and what do all the cool elites do? Arbitrage tax rules across borders.
The readers of this site being merely the upwardly mobile and not the elite, they can only try to do this with state boundaries, not national ones.
The readers of this site being merely the upwardly mobile and not the elite, they can only try to do this with state boundaries, not national ones.
Right you need to do your best to minimize tax burden.
I know for me, as a relatively high income individual, the FTB did not even make a peep about our residency change. They didn't even ask for any documentation, to the best of my recollection.