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How does California tax part-year residents and nonresidents?

Did you move to or from California this year? Have you decided to spend part of the year in the golden state to avoid a cold northern winter?

Residency will affect where and how much you pay in state income taxes. In this blog post, we will look at the definition of residency and how it will affect your tax bill.

Domicile: How it is used to determine residency

The definition of domicile for tax purposes is a place where you establish yourself and your family. You must have the intention of making the place your “true, fixed, permanent home and principle establishment.”

You may travel for work, but your domicile is where you return to on the weekends or after weeks on the road.

Nonresident is helpfully defined as someone who is not a California resident. So this is basically when you do not maintain a home base anywhere in California.

Whether you have moved to the state or away from the state, you are probably going to be considered a part-time resident.

Will you be taxed by California?

This can be a significant issue if you have moved from a state like Texas that has no state income tax. Here is how your residency status affects whether you will be taxed by California:

  • Resident - all your income including sources earned from outside the state are taxed
  • Part-year – all income you received while a resident and California source income received while a nonresident
  • Nonresident – only California source income

The California Franchise Tax Board conducts audits similar to the IRS. It aggressively investigates residency status when it suspects an underpayment of California state taxes. High earners and business owners are the most frequently targeted.

Representing yourself against the state rarely ends in success. If questions arise about your residency and the taxes you owe to the state of California, seek the counsel of an experienced tax attorney.

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