Are you new to California? If so, welcome to our great state! We know you may want to learn about California and its taxes. Whether you're an individual or a business, we've gathered some information that may make your move to our state easier. Just click on the subjects that interest you. In addition, we have a Newcomer's Checklist that you may find helpful.
- Are You Required to File a California Income Tax Return?
- Are You Entitled to Other State Income Tax Credit?
- Do You Know How Community Property Laws Affect Your Taxes?
- Community Property - How to Figure Your Income.
- Did You Sell Your Home?
- What About Moving Expense Deductions?
- Are You Just Visiting?
- Are You a Worker From a Foreign Country?
You may have to file if you were in the State of California for all or part of the year. Check your income in the Nonresident California Tax Booklet, 540NR, for the year in question.
You must file a return if you:
- owe $1 or more of tax, or
- either your gross income or adjusted gross income was more than the amount shown in the Nonresident California Tax Booklet for your filing status, age and number of dependents.
Even if you do not have to file a return, you should file one in order to get a refund if California state income tax was withheld from your pay or if you made California estimated tax payments.
You may have received income that is taxable in two or more states. Let's say you moved to California in the middle of the year. You earned income in another state and paid taxes, then moved to California and did the same. If you paid taxes on the same income in both states, you may be entitled to a tax credit.
If you are a nonresident, the same situation may apply. You may have received income that is taxable in California and in your own resident state as well. If you earn income and pay taxes in more than one state, see California Schedule S. You may qualify for a tax credit.
California is a community property state. This means that all property married couples acquire while domiciled in California is community property. Each spouse owns an equal share of all community property.
Separate property is all property owned separately by the husband or wife before marriage. It includes all property acquired separately after marriage, such as gifts or inheritances. Separate property also includes money earned while domiciled in a separate property state. All property declared separate property in a valid pre- or post-nuptial agreement is also separate property.
Community property ends when either one of the spouses dies. It also ends when the decree of dissolution becomes final or when the couple separates with no intention of rejoining. For more information on community property, see IRS Publication 555, Community Property.
Community property laws affect how you figure your income on your state and federal returns if you're married and file separate returns. Your tax usually will be less by filing joint returns if you are married. However, sometimes it can be to your advantage to file separate returns. If you and your spouse file separate returns, you have to determine your community income and your separate income. For more information, see IRS Publication 555, Community Property.
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, 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.
Note: IRS Form 2119, which was previously used to report home sales, is now obsolete.
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. If you had no former workplace, your new workplace must be at least 50 miles from your old home.
For more information, see IRS Publication 521, Moving Expenses.
If you are new to California, here are some suggestions you might find helpful:
- Find out more about California at the official State website.
- Get a California driver's license and register your vehicle with the Department of Motor Vehicles.
- Change your mailing address online at the United States Postal Service.
- Contact your local Chamber of Commerce for information.
- For visa information, contact the U.S. Citizenship and Immigration Services.
- Register to vote at your local Department of Motor Vehicles Office, or with the Secretary of State.
- If you need business permits or licenses, you may obtain more information at Cal GOLD.
For advice on traveling, see California's Travel Center.
If you are a resident of the United States, just visiting California and receive no income from California sources, you are not subject to income taxes. However, when you make purchases, such as food, clothing, gas and lodging, you will automatically be charged sales or other local taxes.
Federal Sailing or Departure Permit
If you are from another country and you had income in the United States, you may be required to get a sailing or departure permit before leaving the United States. Visit an IRS office to file Form 1040-C or Form 2063. These forms must be filed to get a certificate of compliance or clearance (known as a sailing or departure permit) from the IRS. See IRS Publication 513, Tax Information for Visitors to the United States, to find out more about sailing permits.
If you are not a resident of California, but you work or are engaged in a trade or business in California, you must file a California income tax return. See California's filing requirements in the 540NR Nonresident or Part-Year Resident tax booklet. Also, California Personal Income Tax will be withheld from the wages you earn while working in California. See My employees work in more than one state. To which state(s) do I pay taxes?
If you are from another country and you earned wages in California, you may or may not be subject to state payroll taxes. Call EDD's toll-free number (888) 745-3886 or visit your nearest Employment Tax Office for more information or see "Nonresident of California" in the "Types of Employment" Appendix in the DE 44, California Employer's Guide.
If you are a visitor from another country and you are doing business in California, you may also be required to file a federal income tax return with the Internal Revenue Service. See IRS filing requirements in Publication 17, Your Federal Income Tax for Individuals.
IRS Publication 513, Tax Information for Visitors to the United States, briefly reviews the general requirements of U.S. income tax rules for foreign visitors who may have to file a U.S. income tax return during their visit. Most visitors who come to the United States are not allowed to work in this country. Check with the U.S. Citizenship and Immigration Services before you look for a job. IRS Publication 519, U.S. Tax Guide for Aliens, gives guidelines on how nonresident aliens determine their U.S. tax status and figure their U.S. income tax.