before selling a stock for large profit, can I move from Calif. to another state with no state tax and avoid..

Question

If i want to avoid paying state income tax on a large sum of money I might make off of the sale of a stock, can I move to another state like Texas that has no state income tax and not have to pay California state tax on it? How long will I have to live in Texas before selling the stock? Can I keep our house in California and rent it out or would I have to sell it in order to avoid the tax in California?

Answer 1

You pay tax in the state that you realized the gain. So the answer is yes, you can avoid CA tax. Yes, you can keep your house. Your state of resedency doesn't depend on non-primary living places.

Answer 2

You would have to establish Texas as your "tax home" inorder for this to work for you.

For example, if you move to Texas and telecommute for your regular job in California, then California can come after you for the sale of the stock.

This is a similar situation to the Michael Jordan law where highly paid professional athletes have been required to pay state income taxes in other states that they travel to play their away games.

Answer 3

You would have to establish residence in another state in order to avoid state tax in California. However if you sell it in the year of the move you would have to prorate based on the number of days you lived in the state.

Answer 4

Be careful with this one. California knows this trick. Especially if the stock you are selling is for a business you own.

If it's just portfolio stock, then there might not be a problem, but I would cut all ties to California before selling just to be sure. That means no rental.

Talk to a CPA.

Answer 5

I would have to say at least 6 months or however long it takes to establish residency in another state. I have no input on the house.