[tardo99]

I live in California.

An interesting thing we learned is that if we move out of the country for, say, 3 years, unless we set up our lives so we have no intention of remaining California residents, the state will continue to pursue us for income taxes even while overseas. Federal law has a different system which makes more sense -- a tax exemption while overseas.

Given that we expect to spend a substantial amount of time overseas in the future for personal reasons, I'm thinking we may need to move to a zero tax state in the US first, just to get out from under the sway of California.

I'm curious if anyone else on HN has experience with this.

[gamblor956]

This is a misunderstanding of how CA tax law works.

If you move to say, Nevada, before moving to China or wherever, but you always intended to return to CA afterwards, then for state tax purposes you never stopped being a CA resident. So, for example, if you keep a storage locker with your furniture in Cupertino for when you return, you clearly never intended to permanently leave and so you're still a CA resident for tax purposes.

If you don't plan on coming back to CA after moving to China or wherever, you stop being a CA resident immediately and only owe state taxes for the part of the year you still lived in CA. And it's easy to show that you are no longer a CA resident, for example, by selling all of your CA-based property.

[seanmcdirmid]

If you own a house in California and visit it often, even if you are living in China, they might still claim you are on the hook for California taxes. I guess you really have to move out and then rent the house out or sell it to be off the hook.

The biggest issue with CA and moving abroad temporarily is that CA doesn't have a foreign earned income exclusion or foreign tax credit. So you really don't want to be a CA resident if you need to move out of the USA.

Since I moved to Switzerland (and then China, ironically enough) from CA, it was something I had to look into...I wasn't sure if they would come back and say I was a CA resident even though I really had no ties there. In particular, if I wanted to vote, I could have in CA, but that would have been a bad mistake. On the other hand, I wasn't eligible to vote in any other state, so I spent 11 years not voting. When I finally left China, it was for a job in CA...which also gave me some pause as I didn't intend to return to CA in the first place.

[tardo99]

Thanks. It's too bad people decided to downvote me. Probably because of my username, but who knows. In any event, do you have thoughts on solutions?

[seanmcdirmid]

Claim that your permanent residence to Washington state (or some other income-tax free state) if you go abroad. Actually, make it so by moving to WA first, and then going abroad. Also, not all states are like CA, some do support foreign tax credits at least.

[whatsmyusername]

I hadn't looked but tbf that's a pretty shit username.

[jandrewrogers]

In my experience, California still tries to claim tax residency based on owning a house there (on the basis that it is not a rental in this case), despite moving out of State a decade prior and visiting infrequently. It doesn't matter if you own a house, have a job, and all the other accoutrements of a life in another State, they'll still harass you about paying income tax. Even if you are staying in the country but in another State, it still might be a good idea to dispose of all CA-based property.

When it comes to taxes, California has a serious stalker vibe.

[tardo99]

Obviously I was talking about the situation where one doesn't want to sell all property in CA and wants to be able to return to CA from time to time, maybe for months at a time.

Anyway, our current thinking is to establish residence in Nevada (probably in Tahoe) and then go to Europe from there. Thanks for the downvotes.

[m0zg]

If you're returning for "months at a time", they'll probably still hit you with a tax bill. Not a tax lawyer, though, so take it for what it's worth.

[blahneverdies]

Not sure why this was down-voted, but this has been one of my concerns about ever moving to CA in the first place--I wouldn't want to be stalked by this predatory creature for the rest of my life. (And have already experienced this to a lesser degree with a couple of other-coast states.)

[Keverw]

Yeah, I was wondering how that'd apply to getting accepted in YC... Maybe you intend to go back home after the 3 months or locate to another city big in tech like Austin or Boston. Wonder if California would try to say you were a resident, however I feel like YC would be more similar logically to how college students are treated since usually you are still a resident of where your parents live, unless you intend to get a job and live where you went to school after graduation.

[toast0]

In that case, if it comes up, I think California would be looking at your living situation: are you in a temporary living situation, like a long term stay hotel, or did you rent an apartment and move your stuff. Did you forward your mail and change your accounts? Are you visiting home, or are people visiting you in California. What did you actually do after the YC period, etc.

If you're living and working in California, there's not a whole lot of difference in taxation between a part-year resident and a non-resident who happens to be working in the state often; it's more of a problem when California considers you a full year resident and you're actually working somewhere else. For residents, during the period of residency, all income is treated as California source income, but for non-residents, California only taxes income that is actually from a California source (basically earned income from working in California, or gains on property in California).

Even if you're considered a resident during YC, you wouldn't be taxed on non-California source income before you moved in, or after you moved out. It's usually not a problem when you legitimately move; it's more of a problem when you keep a house in California, and visit frequently, and still get your hair cut in California, still vote in California, etc... Or in the case that you move overseas --- there's a presumption for US citizens that an overseas move is not a permanent move, and that when you come back, you'll return to the last state that you resided in, and many states with all-source taxation for residents will make a strong suggestion that you're still a resident, until you establish residency in another state.

[seanmcdirmid]

California has one way out:

California allows a domiciled taxpayer to be taxed as a nonresident of the state if they are outside of California for an uninterrupted period of at least 546 days under an employment related contract, unless they have intangible income of greater than $200,000, or the principal reason for their absence is tax avoidance.1 The employment related contract can be in another country or another state. The taxpayer is also allowed to have up to 45 days of presence in the state each tax year before they no longer can claim the safe harbor. A person can start filing as a nonresident on the presumption that their out-of-state assignment will last the required 18 months; but if for some reason their foreign employment terminates early and the 546 day requirement will not be met, any tax years for which the taxpayer treated themselves as a nonresident must be refiled as a resident and all taxes owed for that period must be paid.

(https://www.amexpattax.com/news/alleviating-double-taxation-...)

[maximente]

this largely depends on your future plans, such as if you plan to return upon your return to the US. my non-professional recommendation to you is to minimally get a lease w/ witness while signing it in new state, new drivers' license, and utility bills in your name with non-trivial activity. obviously this is not free, but consider it insurance and vastly cheaper than 11% + penalty backtaxes on CA income.

obviously you are welcome to skimp out on any one of these, but you'll have trouble convincing auditors you're a resident without it. note that NYC tax authorities have solicited location data for purposes of 183 day rule, etc.; i am not an expert in CA but precedent is there.

[Keverw]

Yep, I heard of this too. The guy who helped invent the processor moved to Nevada to an apartment, and California tried to say that an apartment isn't a permanent residence and stalked the guy even sending state employees to dig through his trash. He ended up suing California in Nevada and a judge ordered the state to pay him a lot of money, but the state found a loop hole to wiggle out of paying what the judge ordered.

New York is supposed to be very aggressive too. So say you left New York and left items in storage, the state might say you never left.

Same with going to college or the military, you are still considered a resident of your last state since it's assumed your heading back home after college and during the summer breaks, unless you decide to live and stay where you go to college after instead of returning home then you'd need to take steps to change your domicile and move your stuff. One of the reasons you don't have to change your license after 30 or so days, same as someone on vacation since they intend to return home and not living where you are visiting.

I know digital nomads and full time RVers run into this issue, since you are technically homeless for living in a vehicle but still need a driver license and registration somewhere, but a few states are friendly to full time RVers, with South Dakota being the easiest to setup domicile where they only require you to rent a PMB and spend a night at a hotel or campground but all about intent. Some states won't help you unless multiple proofs or you get assistant from a homeless shelter. So if you retired buying a half a million dollar RV, the state considers you the same as a homeless person living on a park bench even if you don't consider yourself homeless.

So you should sell your house, take all your stuff but if you want to keep it in storage rent storage in your new state, update bank to the new state if it's a national bank - if it's a local only bank or credit union need to close your account, update your will for the new state, cancel or switch gym membership if a national gym (like planet fitness, change your home club to your new state) and other steps. Then estate taxes too. I know I was reading once some man who lived in NJ rented a locker in NY and New York decided he was a resident because of that. Then some places will claim you as resident based on where you purchase a grave plot. Seems like this stuff can be tricky, especially the richer you are. I know rich people with multiple homes, domicile issues seem big, but even people who live in RVs have to plan for this. For example recently President Trump declared Florida as his domicile instead of Florida since he owns properties in both states.

Most people only have one house, so that's both their domicile and residence. Then if you are famous, your family get to profit from your likeness when you die, so say you were Elvis, and courts ruled that's based on the state you were domiciled in. Tennessee for example is much more protective and allows family to profit the longest compared to other states, as remember reading someone died and family was trying to argue if they were really a Tennessee or California resident.

So domicile is based on both intent and action. Kinda interesting someone who lives in a RV has to understand and do the same legal steps as a multi-millionaire with multiple houses, but I guess they never considered people would live in RVs, or work remotely traveling. Probably Americans working and living overseas is a minority too, but some states like California don't want to let their residents go. I know someone in a RV group posted they left South Carolina to retire and RV full time seeing the country, and haven't been back to SC for over a year, and the state still wanted to tax them over 6,000 and they charge property taxes on vehicles. Then VA considers a RV a luxury and taxes them extra compared to cars even if your RV is your home. Then someone from Michigan didn't want to change states to one of the friendlier ones, so rented a mailbox and changed his license online, later to get a threatening letter from the DMV since they didn't consider it a valid address, leaving them the option of switching states or using a friend or relatives address. Then I guess after a full time RVer switches domicile, then legally they are just on a long vacation since SD says you have to return once every 5 years.