Tax Planning for Departures From California Including Changes of Domicile and/or Tax Residence

Significant “departure” tax planning opportunities exist for California residents who wish to acquire residence or domicile in a “lower tax” destination and abandon California residence or domicile. For departing residents moving to a lower-tax or no-tax environment, California departure tax planning can eliminate or greatly reduce California tax on gains on movable tangible personal property (e.g., artwork or valuable collections), as well as intangible personal property (e.g., shares of companies, cryptocurrency or other capital assets). For U.S. citizens moving to other states, there are options for avoiding tax on the sale of California real property, as well. For Canadian expats moving back to Canada after completing a job assignment in California or moving home to be closer to family, California departure tax planning can potentially result in the “trifecta” of departure tax planning – i.e., avoidance of California income tax, federal income tax and Canadian capital gains tax on appreciation of personal property arising while the person was a resident of California.

Importantly, we often find that the best California departure tax planning is that which occurs at the time pre-residence tax planning is being implemented, especially for our clients from Canada and other countries. Having at least the outlines of a departure tax plan going into a period of California residence tends to result in our clients making better-informed decisions about setting up for departure during their stay in California. Nevertheless, we can assist you at any stage of your stay here to create a tax-efficient plan for your departure from California.

California is notorious for attempting to tax its former California residents even after they report to the Franchise Tax Board (“FTB”) that they have moved out of California. Our departure tax planning includes in-depth advice concerning how to effectively relinquish California tax residence and domicile, as well as tax advice concerning the time after which California can no longer tax you, in your particular circumstances. Our domicile change plans address more than 50 factors that can affect whether and when your planned change of domicile will become effective for California tax purposes. They also address how to effectively acquire tax domicile in your new place of residence - a requirement from a California tax point of view. In moves to another state having a significant income tax rate, we also help you plan to avoid possible double-state taxation, including planning to maximize use of California’s “other state” tax credit, for any period of possible “dual” state residence.

For departures not expected to be permanent (e.g., other state or overseas work assignments or temporary remote working arrangements), we assist clients who will probably retain their California domicile while absent with planning to effect a change of residence. That includes advice about how to qualify for California’s “safe-harbor” rules for 18-month or longer employment-related absences from the state.

At Lance Cross-Border Law and Tax, we have long experience assisting California residents to effectively relinquish California tax residence and domicile to cut-off future California taxation of non-California source income. We invite you to browse through the information on our website and our blog. In it, you will find answers to some of the questions that you may have concerning California cross-border tax problems or issues. We welcome any further inquiries that you may have concerning your specific tax 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. Our departure tax planning is always less expensive than making amateur mistakes in attempting to abandon California income tax residence and domicile without professional assistance.