State Tax

[fh2000]

This seems like an easy question, but I don't know the answer. We are in California and our tax rate is about 10%. If after retirement, we move to another state, or even another country, how do we claim that we are no longer residence of California and stop paying its tax?

 

[steelyman]

There are certain criteria that I think technically define it. Google can help point you to the right resources. Things like are you physically residing in the other (non-CA) state for more than half the year (183 days), do you have a state license/ID, where is your car registered, do you own property, where do you vote, and so on.

 

[pb4uski]

You would like file a non-resident return for the portion of the year that you were resident and that return would tell them when you were no longer a resident.

 

[clifp]

When I left California, I left late enough, the end of Nov in 1999, that I simply claimed California as my residency as 1999 and Hawaii 2000 to avoid the hassles of filing two returns. Be aware that California is extremely aggressive about going after income of former residents. In fact it took a US Supreme court case before California stop trying to tax pensions of former residents who had moved to other states.

Despite not spending a day in California in 2000, they sent me a bill for $25k, for stock options I exercised while in Hawaii in 2000 that were accumulated while working in California. They backed off with the help of my former California CPA.

If at all possible cut all ties to California as soon as possible when moving, sell your real estate, get a new drivers license, and certainly don't vote in California. If that isn't possible and you still have business ties in California, you'll probably save some hassle if you do some research ahead of moving.

 

[Amethyst]

California is not the only aggressive state. New York and Maryland will go after you with both barrels too, according to acquaintances who've moved to Florida from those states. All the states are desperate for funds, although it seems like they spend more to recover a few bucks than they'd lose by letting it go.

Amethyst

 

[MichaelB]

Residency is not well defined. Whether you own property in the state you leave matters. If you earn no income in California and sell your primary residence, you terminate your California residency by establishing it elsewhere - move to another state, 1) establishing an address 2) domiciling your financial accounts, 3) registering to vote, 4) obtaining your driver's license, 5) registering your vehicle

Leaving the country is a bit more challenging, because some states automatically assume (to their convenience) that you remain a permanent resident of that state. You can first relocate to another state, establish residency there, and then leave the US. This is easier when you have family members in the new state with an address you can use as a base. Otherwise, you move abroad and do the same things as mentioned above: financial domicile, drivers license, voting registration. In addition, all US Embassy and Consular offices have a registration file where you can sign up (for notifications and information) - this helps. Patriot Act make establishing an overseas address onerous, but not impossible for financial accounts.

There have been many threads here on this - try searching. One example http://www.early-retirement.org/forums/f28/state-residency-and-taxes-29228.html Martha and Kramer are particularly knowledgeable on this.

Some very good threads over at RADDR's site as well. Look for posts by Kramer on both state residency and moving abroad. Here's one Raddr's Early Retirement and Financial Strategy Board :: View topic - State residency