state taxes

[ashvar]

hi, 

I moved from California to Texas in mid Jan 2021 due to change of employment. In July 2021 I have realized some capital gains on stock sale. Do I owe capital gains tax to California? The gains were realized while being Texas resident.

Thanks

AJ

[CharlesO]

Hi Ashvar,

For tax year 2021 as long as you have established residency in TX you will file as a part year resident of CA  and report the income you earned while you were living there. 

Here's a good article on how to file as a part year resident:

Filing Multiple States 

Of course, since TX does not have an income tax you will not have to file a TX return.

I hope this helps!

[ashvar]

Thanks CharlesO,

Yes since I have established TX residency, I will file return as a part year resident of CA. Another issue I have is my wife is remote to a CA employer but TX residency. Her employer stopped CA tax withholding after move to TX. So for her too, will the part year resident of CA situation applicable? Since we both moved in mid-Jan 2021 to TX.

[CharlesO]

Yes you are correct. Only her income earned while a resident of CA would be reported on the part year return. If your wife's employer stopped withholding when she moved they should be reporting only her wages earned in CA on her W-2 for CA.

[ashvar]

Thanks! 

How is the date of residency established? Is it the date when I physically moved and start paying rent in TX or a bit later when I have registered vehicle/driver license?

[SundayInSalem]

Your date of residency in Texas starts when you established a permanent home in the Lone Star State. It is not the date you received a driver's license, registered to vote, etc. Commonly it is the date you signed a lease and/or started work. Those are signs you are doing more than "visiting".

Texas does not have an income tax so here is what California says:

You can have only one domicile at a time. Once you acquire a domicile, you retain that domicile until you acquire another. A change of domicile requires all of the following:

• Abandonment of your prior domicile.
• Physically moving to and residing in the new locality.
• Intent to remain in the new locality permanently or indefinitely as demonstrated by your actions.

2020 Guidelines for Determining Resident Status

Texas residency is established when you abandon your California residency and "permanently or indefinitely" put down roots in Texas. Since Texas does not have state income tax, it is to your advantage to use the earliest date possible to establish Texas residency.