Moving from CA to KY to Permanently Work Remote

[nwm]

Hello!

I am moving from CA to Louisville, KY but keeping my job with my CA-based employer. My employer also has offices in NY and TX. There are also many other remote employees scattered throughout the US. My employer will be updating my permanent residence and withholding the KY (and Louisville) taxes instead of CA taxes once my move is official. I have these questions about this arrangement:

1. Let's say I move to KY on June 1. Does this mean that I am a part-year resident of both CA and KY in 2021, and will pay some state income taxes in both states based on my dates of residence? In my example, would I pay CA taxes for all wages earned Jan 1 to May 31 and KY taxes for all wages earned June 1 to Dec 31?

2. In the scenario I outlined in question 1, CA has a progressive tax system and KY has a flat tax. For the CA taxes, do I pay according to the CA tax tables in the same way as if I was a full-year resident, or are there adjustments made by the CA FTB for part-year residents? An example: Let's say I make $20K in CA from Jan 1 to May 31, would I pay taxes on that in the same way as someone who makes $20K as a full-year resident?

3. If I make short trips to CA over the coming years for business, will those be taxed by CA as "duty days," or starting in 2022, will my wages be 100% taxed by KY?

[MaryK4 · Accepted solution]

1. Yes, you would be a part-year resident of California and Kentucky.  You will pay tax for the income you earned in each state.

2. No, you would not pay the tax rate of a full year resident.  Part-year California returns are prepared as if you were a full year resident to determine the tax rate.  The tax rate is then applied only to the California source income.  See Taxation of Nonresidents and Individuals who Change Residency (FTB Publication 1100) for more information.

3. Yes, your wages for 2022 will be taxable in Kentucky- in general, resident pay tax on all income regardless of where it was earned.  However, if you pay tax to California, you will get a credit for the tax paid on your Kentucky return so you will not be double taxed on the same income.

[nwm]

Thank you!