Avoiding the California Tax Bite

The new $10,000 limit on itemized deductions for state and local taxes, has made personal taxes paid in high tax states even more costly. California has the highest top marginal personal income tax rate at 13.3%. Some California residents have considered moving their tax home to a low tax state. However, escaping the gravitational pull of the California tax authorities will take more than renting a condo in Las Vegas or staying out of California for more than six months during the year. Residency is primarily determined by all the facts and circumstances. Following is a list of questions that are commonly asked by a California Franchise Tax Board Auditor:

  1. During the year, how many months did you live in California?
  2. How much of your income was from sources in California?
  3. Are you registered to vote in California?
  4. Do you own a house in California?
  5. In what state do you take your homeowner’s exemption?
  6. Do you hold a California issued driver’s license?
  7. Is your attorney located in California?
  8. Is your investment advisor located in California?
  9. Where do you attend regular worship services?
  10. Where do you make regular religious contributions?
  11. Is your tax professional located in California?
  12. Where are your closest social contacts?
  13. Where are your closest business contacts?
  14. Where are your vehicles registered?
  15. Where do your children attend school?
  16. Did you pay nonresident tuition in California?
  17. Where are your social clubs located?
  18. Where is your union or professional association located?
  19. Where is your bank located?
  20. Where is your personal property stored?
  21. Where do(es) your spouse (and minor children) live?
  22. When you take vacation or time off, where do you visit?
  23. Where is your permanent mailing address?
  24. Where are your:
    1. hair and nails done?
    2. clothes cleaned?
    3. pet(s) groomed?
    4. medical and dental appointments?

Also following are a couple relevant recent news articles:

High-Tax States Make It Hard for the Rich to Leave

Where you’ll pay the most – and least – on state and local taxes in the US

If you are planning on moving your residence out of California, we can help. Even if you plan on remaining a California resident, there may be tax planning options to minimize your State tax burden. Feel free to contact us if you need any assistance.

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