If you used to live in one state, but now live in another, but still have a driver’s license from the prior state, or are still registered to vote there, how do you determine whether you have to pay taxes there?
We were inspired to tackle this question after a Quora user asked “If I have a California drivers license but live and work in Texas, do I have to file a tax return in California?”
Obviously, the specific rules related to whether you have to file a tax return is going to differ state-by-state, but let’s use our answer related to California as a guide.
Rule 1: You generally have to pay taxes in states where you earned income.
According to California’s Franchise Tax Board, you only need to pay taxes in California if you either:
- Earned over a minimum amount of income (e.g. $15K if single, no dependents, under 65 y.o.) from all sources while you were a “resident” or “part-year resident” of California – unlikely that you would be considered one given your status
- Were a “non-resident,” earned income from any source in CA, and overall earned over that same minimum over the year – also unlikely, unless you spent those precious two weeks in CA doing temp work
Rule 2: Your residential status matters – did you live there or were you only temporarily absent?
In California, a “resident” is:
- Every individual who is in this state for other than a temporary or transitory purpose; and
- Every individual domiciled in this state who is outside the state for a temporary or transitory purpose.
A “non-resident” is the inverse. That last rule is the big “loophole” through which California and other states might pursue you. California’s rules address a number of different situations where someone either is or isn’t considered a resident. What constitutes a “temporary or transitory purpose”?
- Simply passing through this state.
- Here for a brief rest.
- Here for a vacation.
- Here for a short period to complete a particular transaction, perform a particular contract, or perform a particular engagement
Our Quora user no longer had a residence (apartment, home, etc) in California, hadn’t lived here in two years, and didn’t have any near-term plans to return to the state, so it’s unlikely his residency in Texas would be considered “temporary or transitory.”
Hope that helps!
Latest posts by Mitchell Fox (see all)
- How Millionaires Pay Less Taxes Than You (or Do They?) - May 9, 2013
- The Tax Benefit of Paying Off School Debt: The Student Loan Interest Deduction - April 23, 2013
- How to Get an Extension to File Your Taxes Later - April 7, 2013