You can be a legal resident of two states simultaneously — but most states (California especially) will assert you are their resident if you maintain significant ties, regardless of where else you also claim residency. True dual residency means you owe income tax in both states, typically with a credit in one state for taxes paid to the other. The practical question is not whether dual residency is legally possible, but which state can claim you as a primary resident — and that determination can cost six figures in back taxes if California makes it for you.
Key Takeaways
- An Overview of Multi-State Tax Issues and How They Impact Residency
- Understanding Residency vs. Domicile
- How California Interprets Domicile
- California Residency Audits
- Why It is Important to Deal With Multi-State Tax and Residency Issues
An Overview of Multi-State Tax Issues and How They Impact Residency
Three key highlights:
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The first thing states like California look at for residency purposes is where your domicile is. Analysis of residency factors comes second.
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There are substantial tax savings from shifting residency out of high tax states.
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California and other states are aggressively auditing individuals and businesses. Protecting yourself is critical.
Multi-state tax issues do not just impact businesses. In fact, they impact people probably a lot more than they impact businesses. The reason for that is people move around a lot more than businesses do. This is especially true if you live in one state during part of the year, then live in a different state the rest of the time.
