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  • California tax question

    Hi all,
    New to WCI! I am newly married and have a question about how our taxes might look for this year. We are planning on filing as married filing separately. I live and work in a state that doesn't have state income taxes, but my spouse recently started a one-year fellowship in California. Our question is whether or not we will have to pay California state income tax on half of my salary given that California is a community property state. From what we have been able to find online, I think this will hinge on whether or not he gets classified as a California resident for tax purposes; what we've been able to deduce is California residents have to pay taxes on all income, regardless of where it was earned (thus having to pay tax on half my salary even though it was not earned in California), whereas nonresidents only have to pay taxes on income earned specifically in California (not having to pay tax on my salary, since it is being earned outside of California). We think we could treat his stay in California as temporary, as his fellowship has a definite end date, and given that the academic year is split into two calendar years, the longest he will be in California during one calendar year is 7 months (we found somewhere that >9 months would automatically classify you as a resident). Additionally, his permanent address is still listed with me in our original state, with his car registered there, his voting being there, etc. Any experience with this?

    TIA!

  • #2
    Without knowing all of the specifics, I would say that you will not have to pay CA SIT on your income next year. Given the facts stated, your hubs will remain a resident of your current state but will owe SIT on all his income earned in CA. Of course, this is general advice and I am not your CPA.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      I can't believe I forgot to thank you
      jfoxcpacfp
      Moderator
      jfoxcpacfp for answering my post back in August!

      Now that we're getting closer to tax time (or at least close enough that if things are too complex for us to figure out on our own we need to start looking for a good CPA before they all refuse new customers) I have a few more questions. I think it's easier with numbers to reference. Let's pull some even numbers and say husband in California is making 50k W2 income a year and I am making 200k W2 income a year in Texas, both of us domiciled in Texas. No children, no owned property, no loans, only investments are tax-advantaged retirement accounts.

      With both states being community property states, do I technically have California-earned income? Would the below be the breakdown of our combined incomes be correct? Does that mean I would then also have to file California state tax if we file as MFS?
      Husband MFS: 25k income from California, 100k income from Texas (file 125k income on federal, 25k income on CA, no state filing for TX)
      Wife MFS: 25k income from California, 100k income from Texas (file 125k income on federal, 25k income on CA, no state filing for TX)

      If that's the case, I'm guessing there isn't necessarily a point in filing MFS and might as well file MFJ?
      Couple MFJ: 50k from California, 200k from Texas (file 250k on federal, 50k on CA, no state filing for TX)

      Or is it like this (I think this is initially what I was hoping but seems unlikely now that I think about community property rules?)
      Husband MFS: 50k income from California (file 50k on federal, 50k on CA, no TX filing)
      Wife MFS: 200k income from Texas (file 200k on federal, no CA or TX filing)

      Or are all my scenarios incorrect and it's something completely different?

      Thank you!

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      • #4
        I d/n know those answers off the top of my head without some digging, sorry I can't help on this one. I do know that, given your hubs is planning to work in CA for > 1 yr, he will likely be treated as a resident there. BUT I would defer to your CPA.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Thank you for responding!

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          • #6
            If it makes a difference in how you approach this situation, just realize California is VERY aggressive in going after income taxes.

            They came after me like I was Al Capone. They have access to bank records from all over the US. I eventually prevailed (was in the right the whole time), but they treated me like I was guilty and had to prove my innocence.

            Just something for you and your spouse to think about. For peace of mind it might make sense to have everything done by a professional who will defend you.

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            • #7
              As a side note, any recommendations for CPAs in California?

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