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jmma
New Member

Moving from MO to CA in a few months

Are there tax savings I should be aware of?

 

I am already in the process of realizing some capital gains that I know I will want.  (In my case, I have a relocation package that covers some taxes.)

2 Replies
dclick
Employee Tax Expert

Moving from MO to CA in a few months

Congratulations on your upcoming move, I hope you enjoy the beautiful California weather.

There are many helpful tax tips for someone moving to California, and especially as a part year move some information that will be beneficial to you.

California publishes a guide on taxes for those new to the state that covers a few CA specifics and part year issues, such as getting a credit for taxes paid to other states when you file your return for 2021:

http://www.taxes.ca.gov/Income_Tax/newind.html

While the Tax Cuts and Jobs Act of 2018 eliminated most moving expenses (though still quite relevant if you are with the military), CA has a more lenient moving tax break available.

If you moved in connection with your job or business or started a new job, you may be able to take this deduction. But your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace (which, it certainly is based on your post). If you had no former workplace, your new workplace must be at least 50 miles from your old home.

This would be a California specific adjustment on CA 540.

If you sold or exchanged your main home as part of this move, you may also want to be aware of the Primary Residence Gain Exclusion:

If you sold or exchanged your main home, do not report it on your federal tax return unless your gain exceeds your exclusion amount. Generally, if you meet the two tests below, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirement in Test 1).

 

Test 1. You owned and used the home as your main home for 2 years or more during the 5-year period ending on the date you sold or exchanged your home.

 

Test 2. You have not sold or exchanged another main home during the 2-year period ending on the date of the sale or exchange of your home (not counting any sales or exchanges before May 7, 1997).

See IRS Publication 523 (PDF), Selling Your Home, for details, including how to report any taxable gain on Schedule D, if:

 

  • You do not meet one of the above two tests,
  • You (or your spouse if married) used any part of the home for business or rental purposes after May 6, 1997, or
  • Your gain exceeds your exclusion amount.

I hope this helps outline some potential savings as the next tax season rolls around for you!

-Dennis




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KochuK
Employee Tax Expert

Moving from MO to CA in a few months

Hi jmma, thank you for joining the "Ask the Experts: Moving" special forum today.

 

Congrats on the upcoming move.

 

You would file part year MO income tax return and part year CA income tax return for tax year 2021.

 

MO highest income tax rate is 5.4% while CA 12.3%. 

 

In general, you would actualize/earn income while in MO as much as can. For example, if you have capital gain, realize it while in MO. If you have capital loss, realize it while in CA. If you have any MO company benefits, such as bonus, vacation pay, make it happen while in MO.

 

Below are a few great TurboTax articles for reference.

How do I allocate (split) income for a part-year state return?

https://ttlc.intuit.com/community/income/help/how-do-i-allocate-split-income-for-a-part-year-state-r...

How do I file a part-year state return?

https://ttlc.intuit.com/community/state-taxes/help/how-do-i-file-a-part-year-state-return/00/2605

Hope this helps.

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