I was a student in Illinois earlier this year, then went to California for a period before coming down to Nevada and earning income there. I filed resident CA state tax last year, and have a CA drivers license. Is it possible to declare NV residency for when I file my taxes for 2020 in 2021? If so, does this mean I do not have to file any State tax in 2021 as NV does not require it? Please let me know if I can provide any addition information that would be telling.
A piece of information you left out-----did you work and receive income in IL or CA in 2020?
You cannot just "declare" residency. States have specific rules as to who is and is not a resident for tax purposes.
In what state is your domicile - your main, primary home? the place you intend to return after temporary absences?
Thank you for the question. I did not work or receive income in IL or CA in 2020. However, I do hold bank accounts in CA which distribute dividends/interest. The only work and income I have in 2020 is sourced from where I currently live in NV. That is a big reason why I suspect I may qualify for NV residency and not file any state income tax returns. Hope that helps.
Thank you for the question TomD8. As I currently live and work in NV as a permanent, exempt, full time employee, I would say my NV address is the place I intend to return after temporary absences. My main confusion here is that there are no concrete guidelines I have found online that classify someone as a resident, part-year resident, or non resident in CA or NV. I understand there are complex cases and factors for classification include location of living, location of financial assets, drivers license, and location of purchases. In addition to what I said in my post, I do still have bank accounts in CA, but have worked and earned income exclusively in NV for 2020, albeit for the later part of the year. This is why I believe I may qualify as a NV resident with limited connections to CA, and not file a state income tax return.
It sounds like you previously lived in CA. If that's so, when did you change your domicile to NV? Be aware that if you were previously domiciled in CA, CA considers you a resident for tax purposes until you abandon your CA domicile and establish your domicile in another state. See Section L on page 10 of this reference for more detail:
Once you become a domiciliary resident of NV (and thus a non-resident of CA), only your CA-source income would be subject to taxation by CA.
Yes, I did previously live in CA. Again, I paid CA residency tax this year for 2019 income. Thank you for the link, looking at these lines -> "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.", I believe I fulfill all of them. However, I really only moved to Nevada with intention to stay permanently due to work starting from September of this year. Even though I only earned income in NV, I am not sure if the duration of living is enough to constitute me as a NV resident and not a CA one.
Technically, you are required to file a part year resident CA return for 2020 (unless your total income was less than $18, 241). Only the income received, while a CA resident is taxable, including income (eg. interest and dividends) received while a student in IL. Your NV income will not be taxable by CA, but is included in the filing requirement.
So, if you interest and dividend amount was small, you will owe little or no CA tax.
If you moved to NV in September with the intent to stay permanently, abandoning your CA domicile, then you would have become a resident of NV - and ceased being a resident of CA - in September.
If that's the case, for 2020 you would file a part-year resident return for CA. All your income prior to your September move would be taxable by CA.
Once you became an NV resident, only your CA-source income - if any - would be taxable by CA.
NV, of course, has no income tax.
Thank you both for the thorough replies. Tom, I remember you answered my last question earlier year as well. Keep doing what you are doing, thanks for doing this. Really appreciate it as someone just getting out in the world.
As I'm preparing to file my taxes now. I just want to be clear about what my state tax filings should look like for 2020 based on the info I provided and the insight of the messages above. From Sept 2020 through the end of the year, Nevada was the place I lived and worked in. I held a permanent job, showed up to work, spent money, and paid for a place to stay in Nevada. However, I still had a California drivers license that whole time. How important is having that NV license when determining residency? Knowing that I never had a Nevada license in 2020, would I still be considered a CA part time resident and NV resident, so I would only need to file for CA part time resident tax?
Your drivers license has nothing to do with establishing your state of residence. You became a resident of NV on the day you began living in your new main, primary home (your domicile in tax terminology) in NV.
Thanks for the response Tom. Again, what I want to do is figure out what state taxes I am required to file. I was domiciled in CA for 2019. There are two possibilities from a CA point of view for my state taxes from the information I provided in the above comments. They would either consider me a resident or a part year resident for tax purposes. I am not so sure that determination is so black and white. Here's why.
Looking at this post on how CA auditors may determine residency,
there are a variety of factors including drivers license.
This is supported by the document you provided me earlier
page 10 section L where changing of domicile requires "Intent to remain in the new locality permanently or indefinitely as demonstrated by your actions."
Actions maybe including getting a license in your new domiciled state.
From a NV point of view,
page 2 of this document describes a submission of a domicile form as well as the need to acquire a NV license 30 days after one becomes a resident. I did not do either of those tasks.
Knowing that CA has a policy that I must prove, beyond a reasonable doubt, that I am domiciled elsewhere. If CA were to audit me, would they communicate with NV, or ask me directly, for this information (like where is your NV license)? If so, would my actions of leaving CA in Sept 2020 for NV, spending money, working, and living in NV enough for them to consider me a part year resident despite the the fact I may not have done the NV tasks?
The key concept here is one of domicile. I think Section L of CA Publication 1031 explains this pretty well.
Once you establish your domicile in a new state, for tax purposes you become a resident of that state. You can have only one domicile at a time. For tax purposes, a change in domicile results in your becoming a part-year resident of each of the two states.
Thus, if you changed your domicile from CA to NV during 2020, you would file as a part-year resident of CA.
Your state of residency for tax purposes is established by the location of your domicile.