California Tax Planning for “Nomadic” Lifestyles

Our new-found ability to work, supervise others, invest and bank electronically, along with our ability to communicate remotely via texting, email, file-sharing and video conferencing, have combined to make it possible to prosper in a modern-day, “nomadic” lifestyle, without having a traditional home base. Indeed, many of my clients were enjoying prosperous “nomadic” lifestyles even before the “pandemic” changed the way we do things. However, the technological innovation and acceptance of a remote-working paradigm the pandemic inspired demonstrated to all that there was really no longer a need for a “brick and mortar” office for many entrepreneurs, managers, investors, small business-owners, coaches, influencers, software developers, professionals and consultants.

Whether you are a retired investor traveling by RV, a new Bitcoin millionaire traveling by private jet, an independent consultant working your way through Europe remotely, or a manager of your own business who operates from your boat at ports along the West Coast, a nomadic lifestyle can be very rewarding. However, modern-day “nomads” who spend several months each year in California can be particularly vulnerable to California residence-based taxation. Indeed, exposure to residence-based taxation may result from a nomad’s seasonal visit to California that would not, on the same facts, expose a non-nomadic visitor to California tax.

In this regard, it is a law of physics attributed to Aristotle that “the universe abhors a vacuum.” That law expects that surrounding matter will immediately act to fill in the resulting void. This law of physics holds true when it comes to state taxation and a nomadic lifestyle. In this regard, California (and most other states) originally structured their rules for determining who is a resident or domiciled in their state around a traditional paradigm in which everyone had an identifiable domicile and at least one fixed place of residence. Those rules function well in that paradigm, as far as it goes.

However, for a client living a nomadic lifestyle, California’s residence rules operate to fill the vacuum left by a lack of identifiable home state residence. This may be found in the inapplicability of California’s 6-month presumption of non-residence to “nomads” who have no permanent home outside California. It may also be found in the application of California’s framework for assigning residence based on the place with which a taxpayer has the closest connections during a tax year (see our webpage entitled “California Nonresident Tax Planning.”). In that paradigm, a nomadic client who spends a longer period each year in California than he or she does anywhere else, can find himself or herself facing California residency in a situation where a person with a traditional home in another state or country may not.

If you live a modern-day “nomadic” lifestyle and spend part of each year in California, we can help you to minimize your exposure to California residence-based taxation, as we have helped others with a similar lifestyle to do. We serve locations all over the world, including the desert communities of Palm Springs, Palm Desert, Rancho Mirage, La Quinta, Cathedral City and Indio. We welcome further inquiries you may have concerning your specific situation. Feel free to call us at (760) 578-5093, contact us via email at Brent@LanceCrossborder.com or by using our online contact form. We will respond to all relevant inquiries without any obligation.