Your California residency ends when you leave to live somewhere else indefinitely.
California taxes residents on all their income and nonresidents only on income from California sources. In law, your residency ends when you are outside California for other than a temporary or transitory purpose. In the year you move, Form 540NR splits your income at the date your residency ended.
Updated · Sources
California residency and audits, 2026
- Over 9 months
- in California in one year, and the law presumes you are a resident. Fewer months do not rule residency out.
- 546 days
- in a row away under a work contract can make you a nonresident while your domicile stays in California.
- 4 years
- is how long the FTB usually has to propose more tax, counted from the due date or the day you file, if later.
What are the California residency requirements for tax purposes?
Section 17014 of the Revenue and Taxation Code makes you a resident if either of the first two tests fits. The other three are a presumption, the FTB’s closest-ties guidance and a safe harbor that can make you a nonresident.
You are in California for other than a temporary purpose
Anyone in California for other than a temporary or transitory purpose is a resident, whatever their domicile. A job with no end date meets the test, and a vacation does not.
Your domicile is in California and your absence is temporary
Your domicile is your true, fixed and permanent home, the place you intend to return to after any absence. A California domiciliary stays a resident during an absence for a temporary or transitory purpose. Changing your domicile takes a real move and giving up any plan to return. You must also intend to stay in the new place indefinitely.
You spent more than nine months in California
The nine-month rule is only a presumption of residence. You can rebut it with evidence that your stay was temporary or transitory. A California domiciliary can stay a resident without spending a single day in the state.
California is where your ties are closest
Under the FTB’s guidance, you are a resident of the place where your ties are closest. The FTB compares your family, home, work, time, bank accounts and licenses in each state, and no single factor decides.
You are away 546 days or more under a work contract
The 546-day safe harbor needs an employment-related contract and an unbroken absence. Visits back totaling up to 45 days a year do not break the run. You lose it if your income from stocks, bonds and other intangibles tops $200,000 in any contract year. It also does not apply if avoiding California tax is the main purpose of your absence.
The same tests decide when someone who moves to California establishes residency there. For income tax, there is no residency application to file. You claim California residency or nonresidence on the return you file. Your conduct over the whole year decides it, so your status is usually judged after the year closes.
How does Form 540NR tax the year you leave California?
Form 540NR gives nonresidents and part-year residents one tax rate. It is the average rate on all their income, as if they lived in California all year. That rate applies only to the income California can tax.
Stays in California all year
$91,537
California taxes all $900,000 at its resident rates.
Moves to Texas mid-year
$40,680
Form 540NR taxes the $400,000 at 10.17%, the average rate on $900,000.
$400,000 as a full year’s income
$33,924
A resident with $400,000 of taxable income would owe this. Taxing the same $400,000 at the whole-year rate costs $6,756 more.
These figures use California’s 2025 tax brackets for single filers, from the FTB’s rate schedule, the latest published. Above $100,000 of taxable income, the schedule takes the place of the FTB’s tax table. The tax on $900,000 is $72,219.84 plus 12.3% of the amount over $742,953, or $91,537. Form 540NR divides that tax by $900,000, rounds the rate to four decimal places (0.1017) and applies it to the $400,000. The $400,000 covers the months in California, plus any California-source income after the move. On its own, $400,000 would owe $30,986.19 plus 10.3% of the amount over $371,479. Exemption credits are left out.
What does a California nonresident pay tax on?
| Resident | Nonresident | |
|---|---|---|
| Return | Form 540 | Form 540NR Also the return for the year you move |
| Wages | All of them | Pay for days worked in California Wherever your employer is based |
| RSUs and stock options | All of it If you live in California when the income is taxed | The California-workday share Counted from grant to vest, or grant to exercise for options. A qualifying ISO sale is not taxed. |
| Stock gains, interest and dividends | All of it | Generally none Except the pay part of an ESPP or disqualifying ISO sale, and installments on a sale made while a resident |
| Rent and sale gains on California real estate | All of it | All of it |
If another state also taxes you as a resident (dual residency), both states can tax your interest, dividends and stock gains. California’s credit for tax paid to another state covers only income earned in that state.
What mistakes keep you taxed after leaving California?
Your ties stayed in California
The FTB says a marital home kept in California is a significant sign of a California domicile. A new house in Nevada and a new driver’s license do not end California residency on their own. The burden is on you to prove your domicile changed. If doubt remains, the FTB treats your domicile as unchanged.
You have no record of your days
In an audit, the FTB rebuilds your days in California from records such as card statements and airline tickets. Your 540NR also asks how many days you spent in California, counting business trips and vacations. Keep a calendar for each year after the move, with the records behind it.
You sold before your residency ended
The gain on a sale you make while still a resident is California income, even if you leave the next week. In an audit, the FTB checks when your large income was realized, against the date it finds your residency ended. That date may be later than the one you claim.
You filed nothing for a year in doubt
If your status for a year is in question, the FTB’s regulation says to file a return anyway. Attach a signed statement explaining your claim of nonresidence, with the evidence for it. With no return on file, the FTB can assess that year at any time.
Plan the taxes on your move out of California before you go.
Valim’s CPAs help people leaving California plan their move with a residency audit in mind, then file the Form 540NR.
- We prepare your Form 540NR for the year you leave, and your new state’s return if it taxes income.
- We time your move around income California would tax in full, such as a large stock sale.
- As awards from your California job vest or are exercised, we split their income by California workdays, the method the FTB uses.
- We work out your California estimated tax on income with no withholding.
- If the FTB sends a notice questioning your move on a return we prepared, we answer it within your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
California residency questions.
Can California still tax me after I move to Texas?
Yes, California still taxes your California-source income after you move to Texas. That includes rent from California property and a bonus for California work paid after you leave. It also includes the California-workday share of pay from RSUs, NSOs and ESPPs. Stock you sell after the move is generally not California income, apart from any part that counts as pay.
What triggers a California residency audit?
Filing Form 540NR is the most common trigger, since the FTB’s audit manual says most residency cases start with that return. Before opening a case, auditors read your residency answers on Schedule CA (540NR) and the addresses on your W-2s and 1099s. They also note large income from stocks or other intangibles, and whether income arrived before or after the move.
What happens to my RSUs if I leave California?
California can still tax RSUs that vest after you leave, to the extent you earned them working in California. Under the FTB’s workday method, California taxes the vest in proportion to your California workdays between grant and vesting. If you leave that job before the vest, the count ends on your last day. Days you work from your new home count as days outside California. If you are still a California resident on the vesting date, California taxes the whole vest.
Do I file a 540NR the year I leave?
Yes, you file Form 540NR for the year you leave if your income passes California’s filing threshold. It is the return for nonresidents and part-year residents. It reports all your income from the months you lived in California, plus California-source income from the rest of the year. Schedule CA (540NR) totals your income as if you lived in California all year, to set the rate. You may need a 540NR in later years too, while RSUs from your California job keep vesting.
Does California tax my QSBS gain?
Yes, California taxes a QSBS gain in full if you live in California when you sell, because it does not follow Section 1202. Sell after you become a nonresident, and the gain on stock held as an investment is generally not California income. Shares you got as pay can still carry California wage income. California’s rule does not change your federal QSBS exclusion.
Is there an exit tax to leave California?
No, California has no exit tax as of September 2026. No law taxes your unsold gains when you leave. Proposition 40, on the November 3, 2026 ballot, would tax people worth $1 billion or more once, at up to 5% of net worth. It looks at residency on January 1, 2026, so moving after that date would not avoid it.
Do I have to pay California taxes if I live out of state?
Yes, California taxes people who live out of state on their income from California sources. Pay for work you physically do in California is California income, wherever your employer is based. So is rent from California real estate, and the gain when you sell it. Pay for days you work from another state is not California income. Whether you must file a nonresident return depends on your gross income and AGI from all sources, including income California does not tax.
Sources
- Cal. Rev. & Tax. Code § 17014, Resident defined
- Cal. Code Regs. tit. 18, § 17014, Who are residents and nonresidents
- Cal. Code Regs. tit. 18, § 17016, Presumption of residence
- Cal. Rev. & Tax. Code § 17041, Tax on residents, nonresidents and part-year residents
- Cal. Rev. & Tax. Code § 17952, Income of nonresidents from intangible personal property
- Cal. Rev. & Tax. Code § 18152, Section 1202 does not apply
- Cal. Rev. & Tax. Code § 19057, Four-year limit on deficiency assessments
- Cal. Rev. & Tax. Code § 19066, Early returns treated as filed on the due date
- Cal. Rev. & Tax. Code § 19087, Assessment when no return is filed
- California FTB, 2025 Form 540NR Tax Booklet
- California FTB, Publication 1031 (2025), Guidelines for Determining Resident Status
- California FTB, Residency and Sourcing Technical Manual (Rev. 01/2026)
- Tex. Const. art. 8, § 24-a, No tax on the net incomes of individuals
- California Secretary of State, Proposition 40, text of proposed laws (2026)
Reviewed and updated September 2026. General information, not advice for your situation.