Should I Move Out of California Due to the Proposed Wealth Tax?
Should I Move Out of California Due to the Proposed Wealth Tax?
Why now?
I am currently getting a lot of questions from individuals wanting to change their state tax status to California non-resident due to ab2088. Ab2088 known as the Wealth Tax, is a bill going through the California legislation process. “This bill would impose a 0.4% annual tax rate on resident’s worldwide net worth in excess of $30,000,000, or in excess of $15,000,000 in the case of a married taxpayer filing separately.”[i]
I do not recommend taking action on ab2088 until we have more understanding on the specifics of how an individual will be impacted by the proposed wealth tax; for example, real estate is excluded from the wealth tax.
Guidelines to Change residency:
For your consideration, the following are guidelines for changing residency:
When you convert from a Resident to a Non-resident, California will closely police your move.
California uses a list of factors to determine residency for a DMV application.[ii]
However, when it comes to moving from the state, they expand the resident criteria.
FTB Publication 1031[iii] gives guideline for determining resident status:
The weightiest factors are the following:
- Amount of time you spend in California versus amount of time you spend outside California.
- Location of your spouse/registered domestic partner and children.
- Location of your principal residence.
- State that issued your driver’s license.
- State where your vehicles are registered.
- State in which you maintain professional licenses.
- State in which you are registered to vote.
- Location of the banks where you maintain accounts.
- The origination point of your financial transactions.
- Location of your social ties, such as your place of worship, professional associations, or social and country clubs of which you are a member.
- Location of your real property and investments.
- Permanence of your work assignments in California.
Finally:
In California, there is no statutory resident provision of the law, but if you spend more than nine months there in any one year, they will presume you are a resident and it’s up to you to prove otherwise.
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GROCO, GROCO Tax, GROCO Technology, GROCO Advisory Services, GROCO Consulting Services, GROCO Relationship Services, GROCO Consulting/Advisory Services, GROCO Family Office Wealth, and GROCO Family Office Services.
Very truly,
Alan Olsen
[i] https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2088
[ii] https://www.dmv.ca.gov/portal/uploads/2020/06/residency_docslist.pdf
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