I have a portfolio of stocks purchased over several years while residing in CA. I plan on moving to Nevada later this year and would like to sell some stocks once I move. Will I still have to report this income to the state of CA and be liable for CA state taxes. Nevada has no personal income tax and CA runs nearly 10%. If I change my mind about living in Nevada and return in
2008 would there be any liability for 2007 State income taxes.
No.
-- Phil Marti Clarksburg, MD
If you really move to Nevada, and sell the stocks after you have become a nonresident of California, California will not tax the gain. You will have a filing requirement for 2007 as a part-year resident of California. Any income you receive before you move to Nevada will be subject to California tax. However, if you return to California within a short time, there may very well be an issue as to whether you actually moved to Nevada with the intent of remaining there. A person who is domiciled in California remains a resident while absent for a temporary or transitory purpose. It does not matter how long the absence is; it can be a year, two years, or more. The point is the purpose of the absence. In order to make an effective move to Nevada, you must sever your ties to California (sell or lease your home, move your household goods, etc.,), move to and reside in a new location (buy or lease a place of abode, register to vote, get a driver's license, register your vehicles, etc.), and intend to remain in the new location permanent or indefinitely. If you do not meet all three of those requirements, your domicile and probably your tax residence will remain in California during your absence. In that case, your gains would be taxable. Katie in San Diego
California's maximum rate is normally 9%, but there is no favorable capital gains rate. Do you expect to be at the maximum rate? How do you know you will be able to sell the stocks at a gain? You domicile for state tax purposes will be determined by facts and circumstances, not the least of which is the strength of your ties to your new home in Nevada and the cleanliness with which you have severed all ties to CA. If you are simply moving to NV to avoid CA taxes for a year and then thinking of moving back, as you already state, it probably won't pass muster. Plus, you'll have to file a part-year resident return for both the year you leave and the year you come back, and both returns will need to identify NV as the state you moved to/from.
-Mark Bole
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