Should I file as California resident for my investment property?

jackkgan — Tue, 25 Nov 2025 03:02:42 GMT

Hi there,

I am originally from California where my parents still live that I visit often . My driving license and voting is also in CA .
I moved to New York in 2023 and stayed there until June 2025.
I moved to Illinois in July 2025.
I just bought a new construction investment property in Merced, CA which will be ready mid-December, and plan to rent it out as soon as I find tenants.
I understand that I will need to file my taxes as resident of 2 states - New York (until June) and Illinois (from July) in 2025, as resident of Illinois in 2026. I guess Illinois would be my domicile for both years.

Question: The Merced Property Manager said that they will deduct 7% tax due to non-resident status in CA. I may not owe any taxes in 2025 for this property as there is no rent but expect to owe in 2026. Please advise if there is any way to avoid the 7% tax . For example, can I or would it help to choose CA as resident /domicile in 2026 as my driving license/voting/parents are in CA and I hope to return to CA after 2 years? Thank you!

Re: Should I file as California resident for my investment property?

NCperson — Tue, 25 Nov 2025 02:49:25 GMT

@jackkgan you can only be domiciled in one state at a time.

So, that is NY until June and IL beginning in July.

You are a non-resident of CA but required to file a tax return since you have sourced income in CA.

Can you post more detail about what this tax is all about? From googling this appears to be WITHOLDING to ensure that non-residents pay the tax due. if you have no 2025 income in CA (i.e. no rents in 2025), there can't be any tax, so you'll be able to get a refund of the 7% by filing a 2025 CA income tax form.

this is what Google AI states:

State Income Tax Withholding: California law requires withholding a 7% state income tax on certain non-wage payments of California-source income made to nonresidents if the payments exceed $1,500 in a calendar year.

topic Should I file as California resident for my investment property? in Investors & landlords

Should I file as California resident for my investment property?

Re: Should I file as California resident for my investment property?