Will California Tax Man Let You Move States?

As reported by Forbes.com:

California’s Proposition 55 extended–through 2030–the “temporary” 13.3% tax rate on California’s high-income earners. It applies to 1.5% of Californians, singles with an income of $263,000, or joint filers with incomes of $526,000. It is the highest marginal tax rate in the nation. And with anticipated cuts in federal taxes in 2017, California’s tax rates may look even higher. And for some people tax-free Nevada, Texas, Washington, and Florida will hold considerable allure.

But fear of being chased by California’s Franchise Tax Board can be real. Fortunately, there is a safe harbor for certain individuals leaving California under employment-related contracts. The safe harbor says that an individual domiciled in California, who is outside California under an employment-related contract for an uninterrupted period of at least 546 consecutive days, will be considered a nonresident unless either:

  1. The individual has intangible income exceeding $200,000 in any tax year during which the employment-related contract is in effect.
  2. The principal purpose of the absence from California is to avoid personal income tax.

The spouse of an individual covered by the safe harbor can qualify too. Return visits to California that do not exceed a total of 45 days during any tax year covered by the employment contract are considered temporary. …

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