Planning a move from CA to GA

[catotx]

My employer recently had a "reduction-in-force" and I volunteered to be on the list.

My accrued PTO and the severance package ("final paycheck") will be paid in Jan 2017, which is a good thing since my tax bracket will be lower. But I am also wondering about the state tax consequences, considering that I plan to move from CA to GA around June 2017 (i.e. will be part-time resident in CA for 2017).

1. Would I pay GA income taxes on the final paycheck? My guess is I should not be paying income taxes twice.

2. If I sell stocks with capital gains, how would the state CG tax be determined? Is it determined by the location where I am at the time of sale? E.g. if I sold the stocks in Jan 2017, I pay CA CG tax, but if I sell in Dec 2017, I pay GA CG tax? In other words, because the tax rate is lower in GA than CA, would I pay less tax if I defer any stock sale until I move to GA?

Thanks for your comments!

 

[DrRoy]

To my knowledge, you pay state taxes based on your residency at the time the income is generated or received. The only way to get the lower rate in GA is to defer the income until after you have moved in June.

 

[MichaelB]

Something similar happened to me - moving mid year from a high tax state to a low tax state, with capital gains and income during the year. My tax return was challenged by both states, but I was well documented and successfully defended my initial filings.

You need to carefully document your change of residence, especially the dates. Financial accounts, voting registration, insurance, car title, drivers license all need to be updated very shortly after moving to Ga. Document the move itself, especially travel records, truck rental, as your Ga residence start date can be when your household goods are moved into your Ga residence.

You will probably be filing as a part year resident in both states. Most states only tax income earned while a resident, along with income sourced in that state regardless of residency, so the residency dates should determine who taxes your severance and capital gains.

Based on the dates you provided, if you correctly establish GA residency in June, your January severence would be subject only to Ca tax, and a YE 2017 capital gain would only be subject to GA income tax. California aggressively pursues former residents for taxes, though, so you cannot be too careful setting up your Ga residency.

 

[catotx]

Thanks for the comments. If I want to save taxes, it does look like I have to wait until I have established residence in GA before selling those stocks.

 

[ItDontMeanAThing]

Is it determined by the location where I am at the time of sale?

Determined by your domicile, which for most is also their residence. California Franchise Tax Board (FTB) Publication 1031 defines (in general terms) what is needed to change one's domicile.

Nolo has the best legal advice for non-lawers I've found.
What Is Your Domicile? | Nolo.com

 

[davismills]

I think your questions have been answered and I just wanted to welcome you to Georgia!

 

[Bamaman]

Congratulations on your pending move to Georgia. You didn't say where you are going to be moving, however the cost of housing there is very, very attractive.

We left the Atlanta area 13 years ago for a much quieter life on the Tennessee River in NW Alabama. We greatly miss our home in an upscale swim/tennis community, however. We sold out at the top of the retail market, but a 4000 square foot beautiful home is now in about $200K in our old neighborhood. We cannot imagine any large city real estate prices to be lower.

I cannot remember the approx. state income tax in GA, but they're middle of the road for the region. All in all, your standard of living will probably improve greatly by moving there.

 

[catotx]

Congratulations on your pending move to Georgia. You didn't say where you are going to be moving, however the cost of housing there is very, very attractive.

We left the Atlanta area 13 years ago for a much quieter life on the Tennessee River in NW Alabama. We greatly miss our home in an upscale swim/tennis community, however. We sold out at the top of the retail market, but a 4000 square foot beautiful home is now in about $200K in our old neighborhood. We cannot imagine any large city real estate prices to be lower.

I cannot remember the approx. state income tax in GA, but they're middle of the road for the region. All in all, your standard of living will probably improve greatly by moving there.

My planned destination is Forsyth county. As you probably know, Forsyth county has one of the lowest property taxes in the Atlanta suburb. It also has excellent schools, which is very important to me since I still have two kids in school.

I have done a fair bit of research on state income taxes. However, moving out from the punitive California state income taxes, tax rates everywhere else look attractive !

Furthermore, Georgia has a retirement income exclusion once a tax payer hits 62. This will reduce the COL further although it will be a while before I can take advantage of it since I am now just past my mid-40s.

 

[GTFan]

I cannot remember the approx. state income tax in GA, but they're middle of the road for the region. All in all, your standard of living will probably improve greatly by moving there.

GA is retiree friendly for income tax - once you hit 62 you can exclude $35k in income per person (max of $4k earned), $65k after you hit 65. Before then it's 6% on everything over $10k or so.

 

[ExFlyBoy5]

GA is retiree friendly for income tax - once you hit 62 you can exclude $35k in income per person (max of $4k earned), $65k after you hit 65. Before then it's 6% on everything over $10k or so.

Not only to mention the property tax (school portion) exemption. This varies from county to county (it appears in Forsyth you can get it at the full rate at 65 and a partial at 62). As an example, I live in Cobb and the taxes on my my home is about $2200. If I was 62 years old, my taxes would be in the neighborhood of $600. Not a bad deal, eh?

One word of caution on taxes. When you move here, you will have to pay a "title tax" on your cars. Currently, it is 7% of the fair value of the car(s) so it can be a chuck of change if you aren't prepared for it and have pricey cars!

 

[Rambler]

We are also planning a move from CA, but to NV instead of GA. One thing I've found that we must be very careful of, is keeping our home in CA. We do plan to keep it, because we've invested so much into it that it will be hard to recoup our investment, AND, we love it. CA has some pretty weird rules around domicile. For us, that means that even though we will keep the home for a few years, I'll need to put it on the market (thank you to Zillow Make Me Move for allowing us to put it on the market without really putting it on the market...we'll just put a number on it that is unlikely to attract a buyer anytime soon). And, according to CA rules, if you move but keep your home, they have a lookback to see if you have actually moved, and you need to show you've moved for work etc. So, I'm thinking about maybe working temp a few hours a week, or maybe trying to find a job with one or the other of my hobby interests, like RVs or guns. I find that as an actual owner of RVs, I know a lot more about them than does the average sales guy, and I've found personally that as an RV buyer, I prefer to speak with RV salespeople who actually know the difference between grey water and black water (if you know what I mean).

Besides the basics of car registration, mailing address, voter registration, all banking relationships changed to new address, etc, we will go all cash for most every trip to CA, may invest in a couple of burner phones and use call forwarding from our main phones, etc, when we visit our home.

Everyone has their own reasons for moving. Honestly we love CA for the climate, our home, things to do, etc., but we can no longer take the politics, and the taxes are seriously eating us alive. So far, we've grown to enjoy NV, and we've found a home there we really like (after one false start).

On a final note, we do plan to time our move with the end of the year. I'll start changing everything around November next year, and have it done by the middle of December, and just call CA our domicile until the end of '17. That gives me two full years until my deferred income kicks in at 12/31/19. CA's look back is something on the order of 550 days, so we should be good.

 

[catotx]

We are also planning a move from CA, but to NV instead of GA. One thing I've found that we must be very careful of, is keeping our home in CA. We do plan to keep it, because we've invested so much into it that it will be hard to recoup our investment, AND, we love it. CA has some pretty weird rules around domicile. For us, that means that even though we will keep the home for a few years, I'll need to put it on the market (thank you to Zillow Make Me Move for allowing us to put it on the market without really putting it on the market...we'll just put a number on it that is unlikely to attract a buyer anytime soon). And, according to CA rules, if you move but keep your home, they have a lookback to see if you have actually moved, and you need to show you've moved for work etc. So, I'm thinking about maybe working temp a few hours a week, or maybe trying to find a job with one or the other of my hobby interests, like RVs or guns. I find that as an actual owner of RVs, I know a lot more about them than does the average sales guy, and I've found personally that as an RV buyer, I prefer to speak with RV salespeople who actually know the difference between grey water and black water (if you know what I mean).

Besides the basics of car registration, mailing address, voter registration, all banking relationships changed to new address, etc, we will go all cash for most every trip to CA, may invest in a couple of burner phones and use call forwarding from our main phones, etc, when we visit our home.

Everyone has their own reasons for moving. Honestly we love CA for the climate, our home, things to do, etc., but we can no longer take the politics, and the taxes are seriously eating us alive. So far, we've grown to enjoy NV, and we've found a home there we really like (after one false start).

On a final note, we do plan to time our move with the end of the year. I'll start changing everything around November next year, and have it done by the middle of December, and just call CA our domicile until the end of '17. That gives me two full years until my deferred income kicks in at 12/31/19. CA's look back is something on the order of 550 days, so we should be good.

I don't quite understand your intentions. Do you plan to still live in the home in CA? Would you still have internet, power and water bills for the CA house under your name? It looks like the CA tax franchise board may come after you aggressively.

I intent to cash out my home in CA (tax-free) and move out. The money will be added to my portfolio. I thought about renting out my CA home but even then, I can only rent it for 3 years so as not to loose the home owner capital gains tax exemption.

 

[Rambler]

We will rarely be there. We will still have power, garbage and internet, but no TV. Water is from a well, sewer is septic, and gas is propane. We don't intend to live here, but we want to be able to use the home for visits with the kids who live in San Francisco, family reunions with extended family, etc. FTB is aggressive, esp with former Californians. You just have to be able to show that the home is not your residence and that you do not intend to return to it as a residence. The job, part time even, where you are required to be elsewhere, solves that. If my kid didn't live in SF, and if my folks had already passed, and if we could get out of it what we'd put in, we'd sell it. It will be kept only for convenience, and only as long as convenient...not for long term or continuous residence.

 

[Bamaman]

You'll be very happy in Forsythe County with the incredible Lake Lanier on the east side of the county.
And thanks to those that filled in the blanks on property taxes and state income tax.
We continue to have a seasonal place in White County in the mountains.
After living in the 'burbs of Atlanta, you realize what a bargain real estate really is. You'll wonder how the rest of the country lives (like in CA) with super inflated house prices.

 

[W2R]

California aggressively pursues former residents for taxes, though, so you cannot be too careful setting up your Ga residency.

This just can't be emphasized too much. I have lived in a number of states and California was unusually aggressive in this respect.

When my ex and I moved from San Diego to Texas back in 1984, his entire organization of several hundred people moved. AFAIK, every single family in his organization was vigorously pursued by California for the entire year's taxes, and had to go through proving when the move took place and when our residency officially changed. They were not satisfied with just knowing when his job moved to Texas but also wanted dates for everything else that was involved in changing residency. This was 32 years ago but somehow I suspect it's not a whole lot easier now than it was then.

So don't think of this as "IF California hassles me"; think of it as "WHEN California hassles me". The silver lining is that if you are well prepared and meticulously document everything, they will give up eventually. Ask California what proof is necessary before you move, not after.

 

[catotx]

Here's one article I read about how aggressive CA's tax board is with pursuing ex-CA residents as residents:

THE PART-TIME RESIDENT TAX TRAP | Sanger & Manes, LLP | Palm Springs, California

To establish legal residency, the FTB auditors appear out of nowhere to interview neighbors. They subpoena the taxpayer's utility bills, credit card records and country club charge slips. They solicit affidavits from friends (and enemies!). In general, they pry into the taxpayer's private affairs.

For example, our firm handled a case in which the FTB concluded that a Texas woman was a California resident despite the fact that all of her business, social and family ties were in Texas and her sole California contacts were a second home in the desert and a country club membership. The basis of the FTB's decision was that the woman put her local subscription to the Los Angeles times on hold when she left the desert and returned to Texas. The times, it so happens, calls that a "vacation hold." In the auditor's creative mind, this meant that her Texas trips must be vacations, which made California her permanent home. We won the case on appeal.