Tax question for part time Californians

[anothercog]

Great information so far. Thanks!

I think during the early part of retirement, I'll be able to keep my taxable income low but if things go well, when RMDs start my taxable income may be more significant.

OTOH, if real estate continues to skyrocket, my CA prop tax may be so low that moving to avoid income taxes makes little financial sense as whatever property I buy in FL may have significantly higher prop taxes. Lots to think about.

 

[cathy63]

A naked link with no explanation? Thanks. It’s an opinion piece, not a news source, and the bill in reference has been drafted but is not under active consideration by the Ca. legislature.

The other part of your post, about anyone spending 60 days in California being subject to state income tax, would also benefit from a link.

The wealth tax bill that died before getting out of committee did plan to tax people with over $30M in assets who spent more than 60 days in CA. The .4% tax would only have applied to assets exceeding $30M and would have been pro-rated according to how long they were actually in the state. There is currently no tax on "anyone who stays in the state more than 60 days", and a quick Google search didn't turn up any proposals to implement one.

I suspect that Chuckanut's friends with the boat heard some incomplete and incorrect version of the wealth tax bill that made them think they shouldn't stay more than 60 days.

CA now has a budget surplus, so I suspect the idea of a wealth tax will remain dead for at least a few years.

 

[pb4uski]

I'm not a tax expert like 2nd Cor and Cathy is, but there is a law that says if you spend 60 days in CA, whether its to visit, vacation, or if you are in a hospital, the reason doesn't matter, you pay CA state taxes.

We are also on the verge of getting wealth taxes and taxing those that leave the state (for 10 years).

If you are there 60 days or more and have earned income then you may have to file a non-resident tax return and pay tax...but only on the income that you earned in California during that 60 days, but not on SS or investment income earned during that time.

 

[MichaelB]

The wealth tax bill that died before getting out of committee did plan to tax people with over $30M in assets who spent more than 60 days in CA. The .4% tax would only have applied to assets exceeding $30M and would have been pro-rated according to how long they were actually in the state. There is currently no tax on "anyone who stays in the state more than 60 days", and a quick Google search didn't turn up any proposals to implement one.

I suspect that Chuckanut's friends with the boat heard some incomplete and incorrect version of the wealth tax bill that made them think they shouldn't stay more than 60 days.

CA now has a budget surplus, so I suspect the idea of a wealth tax will remain dead for at least a few years.

Thanks for setting the record straight.

 

[pb4uski]

Well, I know lots of people, some of them right here on this forum, who are "retired" but still earn money by consulting, doing handyman type jobs, selling handcrafted items, writing blogs or books or newspaper columns, etc. They may not think of it as working, but the state will still want their cut.

While I agree that if someone is docked in California for the requisite time and earning money as described above that they should file a non-resident tax return for that income, if they fail to, either deliberately or unknowing, I'm skeptical that the the FTB will chase them for it... I would think that they would have bigger fish to fry.

 

[pb4uski]

Well, I have the opposite scenario.

If I do a Roth conversion, let's assume $120K, in February 2021 while living in TX. Then in October 2021 I move and establish residency in CA. Would I be on the hook for CA tax on 1) $120K income or 2) $30K (for the 3 months I will be a CA resident) or 3) $0 since the Roth conversion occurred before I become a CA resident? Anyone has a similar experience?

I'm not sure how it works in CA but in most states there is a form where one column is your total income (as if you were a resident) and a second column of your income for that state (VT for example). Then you divide the total of VT income by total income and apply that ratio to the tax as if you were a resident to get your VT tax. Since the Roth conversion occured during the time that you were a TX resident then it would not be VT income and would effectively not be taxed.

 

[Chuckanut]

IIRC, when I moved from CA to WA in the 80's, California taxed me only on the income I earned in California. But, to compute my tax bracket they used all of my income, including that earned in WA.

 

[pb4uski]

That's typical... So if your total income was 100 and 10 was in California and the California tax based on 100 of income was 8, then your non-residential tax owed to CA would be 0.8... 10% of the 8.

And you usually get a tax credit from your state of domicile for the lesser of the tax you paid another state or the tax you would have paid in that state... so if the tax on the 100 of income in your resident state would have been 5, then you would get a credit of 0.5, but if the tax on 100 of income in you resident state would have been 10, then your tax credit would only be 0.8 that you paid to CA.

That's the concept anyway.