I am moving jobs from Calif to Texas (no state income tax). My wife and 2 children will remain in California. I have read the California definition of out of state income and it seems to be about your "ties" back to CA. What can I do to become exempt from Calif income tax with my family still living in CA?
I would become a Texas resident and rent apt.
Family (wife and children) would continue to live in a house we own in California.
I would establish separate banking for me in TX.
Any thoughts or references, case studies to help understand the likelihood of avoiding paying CA Income Tx would be appreciated.
I take it that divorce isn't the answer you're looking for - but such would certainly satisfy the requirements.
If you vote and register your vehicle in TX, that would help. Leaving a family behind does not.
Under IRS rulings and procedures, a "relocation" is not temporary if it exceeds one year but becomes indefininte. It becomes permanent at 2 years. How long is the job supposed to last?
[For Katie to chime in: Will the FTB follow the IRS on this point?]
The main question is whether you intend to return to CA.
See publication 1031 from the FTB website.
formatting link
have general rules and a safe harbor rule. General Rules:
D Guidelines for Determining Residency
The underlying theory of residency is that you are a resident of the place where you have the closest connections. The following list shows some of the factors you can use to help determine your residency status. Since your residence is usually the place where you have the closest ties, you should compare your ties to California with your ties elsewhere. In using these factors, it is the strength of your ties, not just the number of ties, that determines your residency.
Factors to consider are as follows:
? Amount of time you spend in California versus amount of time you spend outside California. ? Location of your spouse/RDP and children. ? Location of your principal residence. ? State that issued your driver?s license. ? State where your vehicles are registered. ? State in which you maintain your professional licenses. ? State in which you are registered to vote. ? Location of the banks where you maintain accounts. ? The origination point of your financial transactions. ? Location of your medical professionals and other healthcare providers (doctors, dentists etc.), accountants, and attorneys. ? Location of your social ties, such as your place of worship, professional associations, or social and country clubs of which you are a member. ? Location of your real property and investments. ? Permanence of your work assignments in California.
This is only a partial list of the factors to consider. Consider all the facts of your particular situation to determine your residency status.
Because your wife and kids go to school in CA, the odds are that you are a CA resident.
The safe habor rule allows you to be a CA non-resident.
Safe Harbor
For taxable years beginning on or after January 1, 1994, a safe harbor is available for certain individuals leaving California under employment-related contracts. The safe harbor provides that an individual domiciled in California who is outside California under an employment-related contract for at least 546 consecutive days will be considered a nonresident unless any of the following is met:
? The individual has intangible income exceeding $200,000 in any taxable year during which the employment- related contract is in effect. ? The principal purpose of the absence from California is to avoid personal income tax.
The spouse/RDP of the individual covered by this safe harbor rule will also be considered a nonresident while accompanying the individual outside California for at least 546 consecutive days. Return visits to California that do not exceed a total of 45 days during any taxable year covered by the employment contract are considered temporary. Individuals not covered by this safe harbor determine residency status based on facts and circumstances. The determination of residency status cannot be solely based on an individual?s occupation, business, or vocation. Instead, consider all activities to determine residency status. For instance, students who are residents of California leaving this state to attend an out-of-state school do not automatically become nonresidents, nor do students who are nonresidents of California coming to this state to attend a California school automatically become residents. In these situations, individuals must determine their residency status based on their facts and circumstances (as described in Section D, Guidelines for Determining Residency, and Section E, Temporary or Transitory Purposes).
Supposing the safe harbor rule applies to you, then since your spouse remains in CA, she is a resident. Half of your income belongs to her, assuming there is no prenup to state otherwise, so I guess you would not need to file a CA-540, but she would on half of the income.
Keep in mind that Kal-E-forn-ya will tax anyone for any reason.
My suggestions are: 1. Take your wife and children to Texas. 2. Take your children to Texas and have your wife commute. 3. File for divorce with a separate maintenance agreement and let it die of old age.
I had a bachelor pad in Baltimore for a year and went home on the weekends. It was a 5 hour drive. Sometimes my childbide came up for the weekend. But, Texas to the Land of Fruits and Nuts is a hell of a drive and airfare is not cheap.
The best advice you can get on this will come from Katie Jacques, MTM's resident State Taxation Authority.
No, IRS rulings as to the determination of residence or relocation have no bearing at all on the determination of residence for state income tax purposes. State residence is defined by each state's statutory and judicial law.
I'm a little late chiming in here; I hope the OP is still around.
Removesps posted excerpts from the FTB's explanatory publication. California law (CRTC Sec. 17014) defines a resident as a person who is present in the state for a purpose that is not temporary or transitory, or who is domiciled in the state and absent for a temporary or transitory purpose. The OP did not state whether the spouses are estranged, or how long his absence from California is expected to be, or whether his wife expects to follow him to Texas at some future time, all of which could enter into the determination of whether he will have changed his domicile from California to Texas, and if not, whether his absence will or will not be temporary. The intentions of the parties also enter into the determination of what law determines the division of income between the spouses, since that determination with respect to each spouse's earnings is made in accordance with the law of his or her domicile. We do not have enough information here to give more than general advice.
The OP's wife and children will remain in California, and it does not appear that the spouses are estranged or separated without the intention of resuming or continuing the marital relationship. Under those circumstances the OP will remain domiciled in California (not having severed his ties to California), and his earnings and those of his wife will continue to be community income under California law, assuming no interspousal agreement to the contrary. (Even if his domicile has changed to Texas, his earnings will be community income under Texas law.) Assuming the OP will be absent from California under an employment-related contract for at least 546 days, spending no more than 45 days of any taxable year in California during his absence, he will be a nonresident of California for income tax purposes under the safe harbor (CRTC Sec 17014(d)) unless the taxpayer has more than $200,000 of income from intangibles or the absence is primarily for tax avoidance purposes.
If the OP is a nonresident and his wife is a resident, regardless of his domicile, half of his earned income is hers and half of hers is his. If they file a joint federal income tax return, they MUST file a joint return in California on Form 540NR. They do not meet the requirements for filing separately because in this case, the nonresident spouse would have California source income, viz., his 50% of his wife's California earnings (and his 50% of any other California source income from community property other than intangibles). California AGI under these rules would include both halves of her earned income plus her half of his Texas earnings; it would also include both halves of any other California source income, and her half of any other community income from sources other than California. (His half of community income from intangibles would be Texas source income, not included.)
If the spouses have separated with no intention of resuming the marital relationship, then under California law each spouse's earned income is his or her separate income from the date of separation. In that case, a joint return would be required only if there is California source community income other than earned income. If the nonresident spouse is a full year nonresident and has no California source income, the spouses may file jointly or separately regardless of the federal filing. None of the OP's Texas source earnings would be included in the California resident spouse's income, unless he is domiciled in Texas and Texas has a different rule from California's. (I'm not sure at what point the community is deemed to end for that purpose under Texas law.)
If the OP will not meet the safe harbor, he probably remains a California resident for tax purposes during his absence; however, more information would be needed to determine that.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.