Will they consider me a resident for CA tax purpose?

11 Replies

Hello,

Apologies but I have a somewhat urgent tax query. We are closing soon on a house in San Francisco, CA. We are US citizens living in the Philippines. I want to ask if we would be considered as residents of CA for tax purposes (in CA this means they can tax my foreign income). A few points I think are relevant.

1. I have never lived in CA. I grew up in Philippines, lived in Pittsburgh from 1996 to 2005, then Philly for 2 years, then NY until 2011. I then moved to Philippines where I live now.

2. My wife lived in CA from 1986 to 1996 (until she left for college) but has not lived there since. She went to NY and was there until 2011, then moved to Philippines with me.

3. My wife's parents still live in San Francisco, and she has 2 brothers living there.

4. We visit family in CA once a year for 2-3 weeks. Otherwise we are not in CA.

5. We have some bank accounts in CA. Otherwise our investments are in stocks or in pension plan overseas.

6. My wife had a driver's license at one point in CA, though this expired many years ago. My driver license was most recently in NY; now I have international driver permit from Philippines.

7. My wife is not sure if she is registered to vote in CA. She was once and may be still but has not exercised this right in a long time. I am certainly not registered to vote in CA.

8. We are buying a property for rental income. We can show that we don't live there by showing rental income.

Does anyone with CA tax experience know if they might consider us residents with this type of profile? Is there any other information that may be relevant here?

Thank you for reading and for your advice.

It's actually one of the more interesting topics in tax nexus for states for the last 25 years. California is aggressive in pursuing former residents highlighted in a case  which was recently contested in the supreme court.

http://www.taxabletalk.com/tag/gilberthyatt/

The challenge I think you have is that you would need to prove to the state that you changed your domicile. 

This is how they will review your case. 

https://www.ftb.ca.gov/aboutFTB/manuals/audit/rstm...

Thanks very much @Tim Butters .

Where I wonder is how they weigh those different items in their checklist. Reality is we live and work in Asia now and we don't have any plans to move back to US, other than going back to CA for 2-3 weeks per year to visit family. I would think that's the classic definition of a non-resident but these rules are all so confusing.

There are no bright line tests for domicile, but the burden of proof is on you to show that you are not domiciled in CA. I've never read any cases for foreign people but consider where your immediate family spends time (i.e. where kids go to school), voting registration, and any other resident tax benefits (resident real estate tax exemptions) that aren't changed automatically which may count against you.

Thank you @Tim Butters . Makes sense and I should be careful not to take certain resident tax exemptions then. Will work with my tax accountant to figure the details. Thanks for your insights!

@Pratish Halady I live in NY and have a rental in CA.  I am considered a NY resident but still have to file a CA tax return for any gains/losses for my CA property.  

California requires you to file for taxes there if you you meet 2 rules: 

1. ANY source income from California 

2. Make over....I believe it's $16,200 for someone who's single. So..basically everyone. 

Thanks @Jeric L. ! Not closed yet so keeping my fingers crossed and hoping we'll get there.

@Pratish Halady I believe your situation is akin to Scott McMillan above - you will not be deemed a California resident but you will be required to pay CA taxes on your CA sourced income (i.e. the rental income). 

Ya if you have ANY source income from Cali and make (based on income from any where) more than...I think it's about $16,000 you have to pay California tax. 

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