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living in 2 states at same time - what about taxes
Old 08-13-2019, 10:21 AM   #1
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living in 2 states at same time - what about taxes

I am looking over a job offer in a new state starting next year.
My thinking is that DW would remain in CA some of the time, and drivers license and car registration would not change and I would fly back week ends. Our home in CA would become a vacation home for a few years.

That would be to keep things simple.... but it isn't since DW and I would not be in the same state all the time.

I am not sure how state taxes would be handled in this configuration.

Option1. Simplest We could define our home address in the new state and file only there, assuming that CA does not have any issue with investment taxes being paid somewhere else while keeping an address here.

Option2. We could only file my W2 income in the new state as a non resident? File everything else in CA. Now the new state is losing a share of taxes.

Thank you for the pointers.
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Old 08-13-2019, 10:26 AM   #2
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Option2. We could only file my W2 income in the new state as a non resident? File everything else in CA.
This is likely the way to do it, although CA will want their's too, unless there is reciprocity agreement (likely not).

You get a tax credit from the state you are working in for the taxes paid on the W2 income, so you only pay the difference to CA.

Claim all income in CA, you are a resident there. Pay the W2 taxes to the new state. Get a CA tax credit for those taxes paid, and pay CA the difference.

Option 1 will not work, unless you sell and make the switch. You can have a different homestead for husband and wife, although that is not common either. I know first hand couples that do that. You should have two permanent addresses.
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Old 08-13-2019, 10:50 AM   #3
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You can have a different homestead for husband and wife, although that is not common either. I know first hand couples that do that. You should have two permanent addresses.
That would be Option3. That would mean Married-filing-separately at the Federal level no? (I would try to avoid that if this is the case)
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Old 08-13-2019, 11:03 AM   #4
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Originally Posted by perinova View Post
I am looking over a job offer in a new state starting next year.
My thinking is that DW would remain in CA some of the time, and drivers license and car registration would not change and I would fly back week ends. Our home in CA would become a vacation home for a few years.

That would be to keep things simple.... but it isn't since DW and I would not be in the same state all the time.

I am not sure how state taxes would be handled in this configuration.

Option1. Simplest We could define our home address in the new state and file only there, assuming that CA does not have any issue with investment taxes being paid somewhere else while keeping an address here.

Option2. We could only file my W2 income in the new state as a non resident? File everything else in CA. Now the new state is losing a share of taxes.

Thank you for the pointers.
If DW continues to reside in Cal and you return regularly, it looks like Cal will continue to treat you as a resident. All your income is subject to tax. Your work state will also want to tax you, but as a part time resident or nonresident, only on income earned there. The tax you pay them should be credited against Cal tax.



It won't be easy to sever residency from Cal if you continue to own a home there that you use regularly.
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Old 08-13-2019, 11:07 AM   #5
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My situation was almost but not quite the same as yours - my young wife and I lived together in CT, I worked in NY and she worked in CT. I paid NY state taxes on my income earned in NY, filing as a non-resident (MFJ). I also filed (MFJ) with the state of CT and we paid taxes on our joint income plus our investment income. I received a credit on my CT taxes for the tax I paid to NY.

This necessitated preparing the tax returns in a strict order - federal first, then NY, and last CT.

If you can pass the test for being a non-resident in the state of your employment, it could work out the same for you. I can't remember what the non-residency requirement was in my case, because I didn't actually live in NY at all (it only seemed that way).
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Old 08-13-2019, 11:07 AM   #6
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Here's the franchise tax board publication that can help you figure this out: https://www.ftb.ca.gov/forms/2018/18_1031.pdf

2018
Guidelines for Determining
Resident Status
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Old 08-13-2019, 11:17 AM   #7
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That would be Option3. That would mean Married-filing-separately at the Federal level no? (I would try to avoid that if this is the case)
Yes, and a higher federal tax rate.
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Old 08-13-2019, 12:21 PM   #8
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Here's the franchise tax board publication that can help you figure this out: https://www.ftb.ca.gov/forms/2018/18_1031.pdf

2018
Guidelines for Determining
Resident Status
thank you for the link, I am digesting this now.
Also found the Calif schedule S applying BTW https://www.ftb.ca.gov/forms/2016/16_540sins.pdf
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Old 08-13-2019, 01:41 PM   #9
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If DW continues to reside in Cal and you return regularly, it looks like Cal will continue to treat you as a resident. All your income is subject to tax. Your work state will also want to tax you, but as a part time resident or nonresident, only on income earned there. The tax you pay them should be credited against Cal tax.



It won't be easy to sever residency from Cal if you continue to own a home there that you use regularly.


+1
CA taxes worldwide income, so easiest option (as Michael B stated) is to maintain CA residency for both you and wife; claim a tax credit in CA for taxes paid in new state; make sure not to somehow trigger residency in new state.

It is not uncommon to have a different home state and work state, so the payroll setup should not be an issue.
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Old 08-13-2019, 02:19 PM   #10
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I traveled regularly and had assignments in many states so I had income and withholding in many states... one year filed 5 state tax returns if I recall correctly.... 4 non-resident and one resident.

In all cases, paid state tax on income earned while working in a non-resident state and then got a tax credit for non-resident state income taxes paid on my resident state income tax return.... net impact was as if all income was in my resident state.

TurboTax easily handled all of this.

You may want to remain a CA resident for property tax reasons... not sure what would happen with property taxes if you own the home jointly and you are no longer a CA resident.
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