Where you live might sound like a simple question. Some would say that the answer is obvious, but things get a little trickier when the incredibly high tax rates out here in California are brought into consideration.
For years now, people have been fleeing California to avoid having to pay the state’s ridiculously high income tax rates, but California has set the precedent that it still considers many of those individuals to be residents…and it wants to collect the taxes they owe.
In order to better understand this situation, we first need to take a look at exactly how astronomical the tax rates are in California. After that, we can start diving into what it really means to be a resident somewhere, or to stop being a resident.
The Brutal California Tax Hikes
The foundation for all of this excitement started back in 2012 when the state of California implemented a “temporary” tax hike that would raise the rate on the wealthiest residents to 13.3%. This hike is scheduled to run all the way through 2030.
Things then got even more complicated when changes were made to the tax laws in 2018. These changes made it so that you cannot write off more than $10,000 in deductions for the year, which made it that much harder for California residents to stomach paying that high income tax.
Where Do You Want to Live?
On account of those two significant changes, it is no surprise that a huge portion of the wealthiest people in California have decided to pack up and move their lives to states that have a more reasonable income tax rate like Arizona or Texas. There has also been a renewed interest in states like Florida that don’t have any state income tax at all.
Unfortunately, the state of California is refusing to recognize the fact that people have moved in a number of key situations. In their eyes, the only residents who can claim to live somewhere else are people who leave for contract work and rarely, if ever, return.
The Fine Print for Former Residents
In order to qualify as a “former resident” of California, you must have a work contract that will keep you out of the state for a minimum of 546 days. Even with a contract, anyone making more than $200,000 in a year or leaving specifically for tax purposes is excluded from this qualification.
It is also important to note that anyone claiming to be a former resident of California because of a work contract cannot visit the state for more than 45 days at a time.
So Where Do You Live?
In cases regarding proof of residency or non-residency, the burden of proof is on the taxpayer. If you are claiming to live somewhere other than California these days, then you are required to prove that you actually do live somewhere else.
In those cases, you can expect to be asked a number of questions concerning your living arrangements. They will want to know where you live, where your spouse and children live, how many days you spent in and out of California, where you have bank accounts, where you have church or social club memberships, where you are registered to vote, and which state issued your driver’s license.
Each of these seemingly small details helps to paint a picture of where you actually live, and that is what the state is looking for. So, if you are claiming to be a former resident of California, you better make sure that you have answers to all of those questions that reflect that.