Leaving California – Moving Checklist
High taxes, real estate, wildfires and rising temperatures make living in California more difficult each year. The cost of living is high, and tax rates are too. California’s 13.3% rate is the same on ordinary income and capital gain, and under a pending tax bill, that rate could climb to 16.8%, retroactive to January 1, 2020.
What’s more, California legislators have even proposed a wealth tax. Yet even without the astonishing proposed tax hikes, paying 13.3% in non-deductible state taxes (after the IRS $10,000 cap) is painful. You can leave for Nevada, Texas, Washington or other no-tax states, but if you aren’t careful, you could end up being asked to keep paying California taxes. In some cases, California can assess taxes no matter where you live.
California’s tough Franchise Tax Board (FTB) monitors the line between residents and non-residents, and is likely to probe how and when you left. A California tax bill could raise the rate to 16.8% retroactive to January 1, 2020. It would hit only very high-income Californians starting over $1 million. If Assembly Bill 1253 passes many more could move, and the burden is on you to show that you are not a Californian. If you are in California for more than nine months, you are presumed to be a resident. And any more than six months usually means that too. Many people who leave have unrealistic expectations and have a hard time distancing themselves from California. And be careful, because in California tax disputes, procedure counts.
Although the IRS can audit 3 or 6 years, California can sometimes audit forever. California, like the IRS, gets unlimited time if you never file an income tax return. That can make filing a non-resident tax return—just reporting your California-source income as a non-resident—a smart move. California looks to objective factors to determine residency. Your time in California versus time outside counts. California uses a comparative analysis to see if you have closer connections to another state. Consider the size and value of your residences, and the location of the property on which you claimed the homeowner’s property tax exemption. Where your driver’s license was issued, cars are registered, professional licenses, registration to vote all counts. So does the location of your banks, doctors, dentists, accountants, church, temple or mosque, and more. What clubs are you a member of, and where?
Where do you work, and have business and social contacts? Where do you have all your mail sent? But as you might expect, physical presence is the biggest issue. If you spend more than 9 months in California, you are presumed a resident. If you spend 6 months or less in California, you may qualify as a seasonal visitor, but only if you don’t work while you are here and meet other tests. If you leave, consider this checklist:
- Get a new other state driver’s license, and turn in your California one.
- Move and register your car(s) in your new state.
- Notify California DMV, move vehicles and re-registration.
- Insure cars and real estate with insurance in the new state
- Register to vote in the new state.
- Cancel California voter registration for old residence.
- Terminate California club memberships.
- Join clubs and social groups in the new state.
- Relocate family to the new state.
- Move cherished family heirlooms (photos, keepsakes, etc.) to home in the new state.
Sell, list for sale, or lease (preferably a long-term lease) any California property—selling is best.
- Terminate lease of any California property.
- Lease (long-term) or buy residence in the new state. Buying is best.
- Notify friends and family of permanent move out of California.
- Notify banks, credit card companies, etc. of move and provide new state address for statements. Have correspondence including bank statements, credit card statements, etc., sent to new state address.
- Use healthcare providers and other advisors in the new state.
- File change of address forms with US Postal Service and IRS.
- Obtain new state phone numbers.
- Send holiday cards, birthday cards, and other correspondence from new home.
- Change professional affiliations and licenses as needed to the new state
- Establish office or workplace in the new state.
Relocation Ventures expert staff can give you the tools you need to evaluate your options and make the best decision for you and your family.