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Is this a successful way to dodge taxes? If so, that loophole should be fixed. I left California 4 years ago and yet somehow still pay taxes to the state. If y

Is this a successful way to dodge taxes? If so, that loophole should be fixed. I left California 4 years ago and yet somehow still pay taxes to the state. If you're saying that anyone who was professionally successful in California has no right to ever leave the state, that seems like a tough sell.

beowulfey 6y ago
Why do you still pay taxes in California? Do you have a residence there?
- setpatchaddress 6y ago
  CA Tax Board is pretty aggressive: if you work for a business located in CA, they want your income.
  - JKCalhoun 6y ago
    Yes, you need to retire outside California.
    - kelnos 6y ago
      Which is often just not that necessary... must people's income levels in retirement are low enough that CA's income taxes are competitive with many other lower-tax states (not those with no income tax, though, of course).
    - Cookingboy 6y ago
      That's just not true. You can fully move and start working for a non-CA company and you wouldn't be paying CA taxes. You make it sound like if you ever lived in CA you have to pay CA tax for the rest of your life until you retire lol.
  - alpha_squared 6y ago
    I recognize this is just my personal experience, but this doesn't hold true for me in the slightest. I grew up and lived in CA for over two decades, but now located in a state with no income tax and employed by a company in the bay area. I pay zero state income tax, as do all my coworkers in the area.
  - claydavisss 6y ago
    I work for a CA company and work in TX. I do not pay CA taxes, and my taxes are prepared by an accountant.
- toast0 6y ago
  If you have RSUs that were in while you were working in California or a resident of California, the Franchise Tax Board claims a portion of the income as California source when (if) they finally vest. That could be years later, when you're no longer a resident. If you move from California to another country, and are subject to US Federal Income tax, and don't qualify for an exemption, the Franchise Tax Board still considers you a resident of the state, and as such, taxes you on your worldwide income; as you did not end your residency by establishing residency in another state.
  - cft 6y ago
    What if you have your own CA LLC? Would they require paying a tax on its sale even if it's re-incorporated in another state?
  - ghaff 6y ago
    In this case, one also assumes that Musk will continue to spend a fair bit of time in the state. Low-profile people can usually get off with just paying taxes in their home state even though they spend a lot of their time at company offices, conferences, etc. elsewhere. But presumably there is some threshold beyond which you're supposed to be filing taxes in other locales.
    - njarboe 6y ago
      New York city has its own income tax rate of 3.9% for high earners. This can be quite a bit of money for hedge fund managers/owners. I've read that some of them live outside NYC to avoid the tax but need to hire a full time person to document and make sure they are not counted as a NYC resident by the city. You can only spend so many nights in NYC and not be counted as a resident, show proof of you being somewhere else, etc. Income taxes has so many bad consequences. It would be great to ban it and replace it with land value taxes.
      - ghaff 6y ago
        The letter of the law in a lot of places can be even worse than that. [1] There's been federal legislation proposed but AFAIK, nothing has been passed. A lot of states theoretically require you to file a tax return even if you only travel there for a day. Of course, I'd be shocked if pretty much anyone complied with that for sometimes travel. But it means lots of people are basically committing tax fraud; many/most probably don't even know they are. [1] https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2013/12/12/road-warrior-state-income-tax-laws-vary-widely https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
bsamuels 6y ago
I don't know the specifics, but I believe the parent comment is alluding to business specific taxes, not the capital gains tax you probably pay as a no-longer-california-resident.
adkadskhj 6y ago
I think rather that people/gov gave a bunch of benefits to be in state that cost the state, but they didn't require that he stay in the state. So i think the implication is that he took resources from the state but didn't stay long enough for the gov/people to see an ROI. But, as much as i am a lefty(+capitalist), that seems a fault of the state. States should expect this more imo. You give near negative returns to companies to come to your state and then you're shocked when they leave and you haven't gotten your ROI? But maybe this will be good. If the migration continues perhaps California will have to stop subsidizing low-tax states and let them fend for themselves more.
- Foober223 6y ago
  > You give near negative returns to companies Does California invest money/resources to companies? Or is it more of an indirect thing, such as maintaining roads and bridges? Why are businesses choosing to hop off the California gravy train? Is the gravy not worth the taxes? Is the gravy just hyperbole?
siberianbear 6y ago
(I am not a lawyer, this is not legal advice) I left California for Nevada many years ago, and I subsequently sold stock I accumulated while in California without paying state income tax. It is legal and you can do it, but there are a lot of legal hurdles. They're pretty well documented around page 5 of FTB 1031 [1]. In my case, I quit my W2 job in California, entered into a contract to lease a home in NV, got rid of all leased or owned real estate in CA, sold or re-titled all motor vehicles from CA, registered to vote in NV, surrendered my CA driver license for a new NV license, re-titled all my financial accounts at my new address, got a NV phone number, etc. This was all easy because I was single without children. If my situation was more complicated, like I had a spouse or ex-spouse with children enrolled in CA schools, or decided to retain owned real estate in CA, the situation can quickly fall into a gray zone. If you have a W2 job in CA while claiming you're in NV, it's very hard to escape the CA FTB. CA is very aggressive about chasing down its former residents. It's important to check all the boxes to get them from chasing you. After I left, I filed non-resident CA returns for three years basically saying, "I had income but I am not a resident and it was not from a CA source, therefore I owe no CA tax." This is important because it starts the statute of limitations running. If you don't file, the statute of limitations doesn't start. And while I'm writing all this: what in the world is up with a 13.3% state tax bracket? Screw California. [1] https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf
- jrsj 6y ago
  Those high brackets really only apply to people that are making a lot of money. I make $100k right now and my state tax in California would be nearly the same as it is in Ohio at that rate. That being said, with my work being remote indefinitely I’m going to Texas to save over $400 a month in tax (and cost of living is about the same — very low).
- tradertef 6y ago
  Thank you for this. Very useful for someone considering moving out :)
- uberduper 6y ago
  I guess your case was extra special. I remained employed by the same company after moving from CA to AZ and the FTB never bothered me. The year I relocated, I filed my.. 540? after determining what income I earned while living in CA. And that was that. No issues with my options or RSUs either. Being married and having a child was also a non-issue.

beowulfey 6y ago

Why do you still pay taxes in California? Do you have a residence there?

setpatchaddress 6y ago
CA Tax Board is pretty aggressive: if you work for a business located in CA, they want your income.
- JKCalhoun 6y ago
  Yes, you need to retire outside California.
  - kelnos 6y ago
    Which is often just not that necessary... must people's income levels in retirement are low enough that CA's income taxes are competitive with many other lower-tax states (not those with no income tax, though, of course).
  - Cookingboy 6y ago
    That's just not true. You can fully move and start working for a non-CA company and you wouldn't be paying CA taxes. You make it sound like if you ever lived in CA you have to pay CA tax for the rest of your life until you retire lol.
- alpha_squared 6y ago
  I recognize this is just my personal experience, but this doesn't hold true for me in the slightest. I grew up and lived in CA for over two decades, but now located in a state with no income tax and employed by a company in the bay area. I pay zero state income tax, as do all my coworkers in the area.
- claydavisss 6y ago
  I work for a CA company and work in TX. I do not pay CA taxes, and my taxes are prepared by an accountant.
toast0 6y ago
If you have RSUs that were in while you were working in California or a resident of California, the Franchise Tax Board claims a portion of the income as California source when (if) they finally vest. That could be years later, when you're no longer a resident. If you move from California to another country, and are subject to US Federal Income tax, and don't qualify for an exemption, the Franchise Tax Board still considers you a resident of the state, and as such, taxes you on your worldwide income; as you did not end your residency by establishing residency in another state.
- cft 6y ago
  What if you have your own CA LLC? Would they require paying a tax on its sale even if it's re-incorporated in another state?
- ghaff 6y ago
  In this case, one also assumes that Musk will continue to spend a fair bit of time in the state. Low-profile people can usually get off with just paying taxes in their home state even though they spend a lot of their time at company offices, conferences, etc. elsewhere. But presumably there is some threshold beyond which you're supposed to be filing taxes in other locales.
  - njarboe 6y ago
    New York city has its own income tax rate of 3.9% for high earners. This can be quite a bit of money for hedge fund managers/owners. I've read that some of them live outside NYC to avoid the tax but need to hire a full time person to document and make sure they are not counted as a NYC resident by the city. You can only spend so many nights in NYC and not be counted as a resident, show proof of you being somewhere else, etc. Income taxes has so many bad consequences. It would be great to ban it and replace it with land value taxes.
    - ghaff 6y ago
      The letter of the law in a lot of places can be even worse than that. [1] There's been federal legislation proposed but AFAIK, nothing has been passed. A lot of states theoretically require you to file a tax return even if you only travel there for a day. Of course, I'd be shocked if pretty much anyone complied with that for sometimes travel. But it means lots of people are basically committing tax fraud; many/most probably don't even know they are. [1] https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2013/12/12/road-warrior-state-income-tax-laws-vary-widely https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...

bsamuels 6y ago

I don't know the specifics, but I believe the parent comment is alluding to business specific taxes, not the capital gains tax you probably pay as a no-longer-california-resident.

adkadskhj 6y ago

I think rather that people/gov gave a bunch of benefits to be in state that cost the state, but they didn't require that he stay in the state. So i think the implication is that he took resources from the state but didn't stay long enough for the gov/people to see an ROI. But, as much as i am a lefty(+capitalist), that seems a fault of the state. States should expect this more imo. You give near negative returns to companies to come to your state and then you're shocked when they leave and you haven't gotten your ROI? But maybe this will be good. If the migration continues perhaps California will have to stop subsidizing low-tax states and let them fend for themselves more.

Foober223 6y ago
> You give near negative returns to companies Does California invest money/resources to companies? Or is it more of an indirect thing, such as maintaining roads and bridges? Why are businesses choosing to hop off the California gravy train? Is the gravy not worth the taxes? Is the gravy just hyperbole?

siberianbear 6y ago

(I am not a lawyer, this is not legal advice) I left California for Nevada many years ago, and I subsequently sold stock I accumulated while in California without paying state income tax. It is legal and you can do it, but there are a lot of legal hurdles. They're pretty well documented around page 5 of FTB 1031 [1]. In my case, I quit my W2 job in California, entered into a contract to lease a home in NV, got rid of all leased or owned real estate in CA, sold or re-titled all motor vehicles from CA, registered to vote in NV, surrendered my CA driver license for a new NV license, re-titled all my financial accounts at my new address, got a NV phone number, etc. This was all easy because I was single without children. If my situation was more complicated, like I had a spouse or ex-spouse with children enrolled in CA schools, or decided to retain owned real estate in CA, the situation can quickly fall into a gray zone. If you have a W2 job in CA while claiming you're in NV, it's very hard to escape the CA FTB. CA is very aggressive about chasing down its former residents. It's important to check all the boxes to get them from chasing you. After I left, I filed non-resident CA returns for three years basically saying, "I had income but I am not a resident and it was not from a CA source, therefore I owe no CA tax." This is important because it starts the statute of limitations running. If you don't file, the statute of limitations doesn't start. And while I'm writing all this: what in the world is up with a 13.3% state tax bracket? Screw California. [1] https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf

jrsj 6y ago
Those high brackets really only apply to people that are making a lot of money. I make $100k right now and my state tax in California would be nearly the same as it is in Ohio at that rate. That being said, with my work being remote indefinitely I’m going to Texas to save over $400 a month in tax (and cost of living is about the same — very low).
tradertef 6y ago
Thank you for this. Very useful for someone considering moving out :)
uberduper 6y ago
I guess your case was extra special. I remained employed by the same company after moving from CA to AZ and the FTB never bothered me. The year I relocated, I filed my.. 540? after determining what income I earned while living in CA. And that was that. No issues with my options or RSUs either. Being married and having a child was also a non-issue.