California Residency and Taxes: What the FTB Looks For When You Leave the State
A Complete Guide to Establishing Non-Residency and Avoiding FTB Audits
Every year, thousands of Californians relocate to states with lower—or no—income taxes. Nevada, Texas, Florida, Arizona, and Washington have become popular destinations for individuals and business owners seeking relief from California’s top marginal rate of 13.3%, the highest state income tax in the nation.
But here’s what many departing residents don’t realize: simply moving to another state doesn’t automatically end your California tax obligations. The Franchise Tax Board (FTB) aggressively pursues former residents who claim to have left but maintain significant ties to California. These residency audits can result in years of back taxes, substantial penalties, and interest charges that dwarf any savings the move was supposed to provide.
As an Enrolled Agent based in Whittier, Los Angeles County, I work with clients across the country—and around the world—who face FTB residency challenges. Some come to me after receiving audit notices. Others are planning their departure and want to do it right from the start. In both cases, understanding exactly what the FTB looks for is essential to protecting yourself.
This guide explains California’s residency rules, the specific factors the FTB examines, and the steps you can take to establish clean non-residency when you leave.
Why Is California So Aggressive About Residency?
California has strong financial incentives to keep former residents on its tax rolls. With a top tax rate of 13.3% on income over $1 million, a single high-income individual represents significant revenue. When that person moves to Nevada or Texas and stops filing California returns, the state loses that revenue stream entirely.
The FTB knows that many people who claim to leave California don’t actually sever their ties completely. They keep homes in the state, maintain California professional licenses, return frequently for business or family, and in some cases never really intended to become residents of their new state at all. The agency has dedicated resources specifically to identifying these situations.
The result is that California residency audits are more common—and more thorough—than in most other states. If you’re a high-income individual leaving California, you should assume the FTB will eventually take a close look at your departure.
How Does California Define Residency?
California uses two tests to determine residency, and meeting either one makes you a resident for tax purposes.
The Domicile Test
Your domicile is the place you consider your permanent home—the location you intend to return to whenever you’re away. You can have multiple residences, but you can only have one domicile at a time. Under California law, you’re a resident if California is your domicile, regardless of how much time you actually spend in the state.
Domicile is about intent. Where do you consider “home”? If the answer is California—even if you spend most of your time elsewhere—you’re a California resident.
The Presence Test
Even if you’ve changed your domicile to another state, California can still claim you as a resident if you’re present in California for other than a temporary or transitory purpose. This is more subjective than a simple day count, though time spent in California certainly matters.
The FTB looks at why you’re in California. Visiting for vacation or occasional business is temporary. Maintaining an active business presence, keeping children enrolled in California schools, or spending more time in California than your claimed new home state suggests your presence isn’t transitory at all.
The FTB’s Residency Audit Factors: What They Actually Examine
When the FTB audits a residency change, they look at a comprehensive set of factors. No single factor is determinative—the agency considers the totality of circumstances. However, some factors carry more weight than others.
Location of Your Primary Residence
Where is your largest, most valuable home? If you keep a $3 million house in Los Angeles and rent a modest apartment in Las Vegas, the FTB will question whether you’ve truly changed domicile. The relative size and value of homes in California versus your new state matters significantly.
This doesn’t mean you must sell your California property immediately upon leaving. But if you keep it, the FTB will want to see evidence that it’s no longer your primary residence—that it’s rented out, used only occasionally, or clearly secondary to your new home.
Where Your Spouse and Children Live
Family location is heavily weighted. If your spouse and children remain in California while you claim Nevada residency, the FTB will likely conclude that California remains your domicile. Where your family lives is strong evidence of where you consider home.
Children enrolled in California schools are particularly problematic. If your kids attend school in Los Angeles but you claim Texas residency, expect the FTB to challenge that position.
Time Spent in California Versus Other Locations
The FTB will want to know how many days you spent in California versus your new home state. While there’s no bright-line rule, spending more than six months in California raises serious questions. Spending more time in California than anywhere else makes claiming non-residency extremely difficult.
Document your location carefully. Keep calendars, travel records, credit card statements, and anything else that establishes where you were on any given day. If you’re audited, the FTB will reconstruct your movements in detail.
Where You’re Registered to Vote
Voter registration is one of the strongest indicators of domicile. If you remain registered to vote in California—or worse, actually vote in California elections after claiming to have left—you’ve created powerful evidence that California is still your home. Register to vote in your new state promptly.
Driver’s License and Vehicle Registration
What state issued your driver’s license? Where are your vehicles registered? These are simple administrative changes that signal intent. Keeping a California license while claiming Nevada residency undermines your position.
Professional Licenses and Business Interests
If you’re a licensed professional—attorney, CPA, contractor, real estate agent—where are your licenses active? Maintaining an active California professional license suggests ongoing California connection. Similarly, owning or operating businesses in California, even if you’ve moved personally, creates residency risk.
Bank Accounts and Financial Relationships
Where are your primary bank accounts? Where do you keep your safe deposit boxes? Who are your financial advisors, and where are they located? While you don’t need to close every California account, your primary banking relationships should shift to your new state.
Social, Religious, and Community Ties
The FTB examines softer factors as well. Where do you attend religious services? What clubs and organizations do you belong to? Where are your closest social relationships? These factors help paint a picture of where your life is actually centered.
Where You Receive Mail and Keep Important Documents
Your mailing address matters. If all your important mail still goes to a California address, it suggests California is still home base. Update your address with financial institutions, the IRS, professional organizations, and anyone else who sends you important correspondence.
The “Closer Connection” Standard
When the FTB weighs all these factors, they’re ultimately asking one question: where is your closer connection? If your ties to California remain stronger than your ties to your new state, California will claim you as a resident regardless of where you sleep most nights.
This is why half-measures often fail. Moving to Nevada but keeping your California home, maintaining your California social life, and spending nearly as much time in California as Nevada doesn’t establish a closer connection to Nevada. It establishes that you have homes in two places but California is still where your life is centered.
Successfully changing residency requires genuinely shifting your life to your new state—not just changing your mailing address and hoping the FTB doesn’t notice.
Special Situations: Part-Year Residents and Safe Harbors
Part-Year Residency
If you move out of California mid-year, you’ll file as a part-year resident for that year. California taxes your income earned while you were a resident, plus any California-source income earned after you left. Properly determining your residency end date—and allocating income accordingly—is critical.
The date you physically leave California isn’t necessarily your residency end date. If you spend the next several months traveling before settling in your new state, residency questions become complicated. The FTB will look at when you actually established domicile elsewhere, not just when you loaded the moving truck.
The Safe Harbor for Temporary Absences
California provides a safe harbor for residents who leave temporarily for employment. If you leave California under an employment contract for at least 546 consecutive days, you may be treated as a non-resident during that period even if California remains your domicile. However, this safe harbor has strict requirements and doesn’t apply to business owners or self-employed individuals in most cases. It’s also not a path to permanent non-residency—it’s a temporary exception.
What Happens in an FTB Residency Audit?
FTB residency audits are notoriously thorough. The agency will request extensive documentation, including bank and credit card statements showing where you made purchases, cell phone records showing where you were when you made calls, social media activity showing your location and activities, travel records including flight itineraries and hotel receipts, calendars and appointment books, employment records and business documents, and property records for all real estate you own.
The FTB may also interview you, your family members, your business associates, and others who can speak to where you actually lived. These aren’t casual conversations—they’re investigative interviews designed to test your claimed residency.
Audits can cover multiple years. If the FTB determines you were actually a California resident for a year you filed as a non-resident, they’ll assess tax on your entire worldwide income for that year—plus penalties and interest. For high-income individuals, a single year’s adjustment can exceed six figures.
The audit process typically takes 12 to 24 months, sometimes longer. During that time, you’ll need to respond to multiple information requests and potentially meet with auditors. Having professional representation during this process significantly affects outcomes.
Steps to Establish Clean Non-Residency When Leaving California
If you’re planning to leave California, taking deliberate steps to establish non-residency will protect you if the FTB comes calling later. The time to build your documentation is before and during your move—not years later when you’re trying to reconstruct records.
Before you move, document your intent. Write a statement explaining why you’re leaving and your intention to make your new state your permanent home. This isn’t legally required, but contemporaneous documentation of intent is valuable if you’re later audited.
Immediately upon arriving in your new state, obtain a new driver’s license and register your vehicles there. Register to vote in your new state. Open bank accounts with local banks. Establish relationships with local professionals—doctors, dentists, accountants, attorneys.
If you’re keeping your California home, consider renting it out. A leased property is clearly not your primary residence. If you’re not renting it, limit your time there and document that your new home is where you actually live.
Track your days carefully. Know exactly how many days you spend in California versus your new state. Keep records that prove your location—credit card statements, toll records, cell phone data. If you’re ever audited, you’ll need to account for every day.
Build a life in your new state. Join local organizations. Attend a local church or synagogue. Get involved in your new community. The more genuine ties you have to your new home, the stronger your position.
Frequently Asked Questions About California Residency and Taxes
How many days can I spend in California without being considered a resident?
There’s no specific day limit that guarantees non-residency. Unlike some states, California doesn’t have a bright-line test. However, spending more than six months in California creates significant risk, and spending more time in California than your claimed home state makes establishing non-residency very difficult. The FTB considers time spent in context with all other factors—your days in California are just one piece of the analysis.
Can I keep my California home and still be a non-resident?
Yes, but it complicates your position. If you keep a California home, you’ll need strong evidence that your new state is your primary residence—a larger or more valuable home there, limited time spent at the California property, and ideally rental of the California home to third parties. The FTB will scrutinize the relative value of your properties and how you use each one.
My business is still in California. Can I be a non-resident?
Having a California business doesn’t automatically make you a resident, but it creates complications. You’ll still owe California tax on income sourced to California, regardless of where you live. And if your business requires your frequent physical presence in California, that time counts against you in the residency analysis. Many business owners who relocate eventually need to restructure their business presence as well.
What if my spouse stays in California while I move?
This is one of the most difficult situations. Where your spouse lives is strong evidence of your domicile. If your spouse remains in California—especially with children—the FTB will likely argue that California remains your family home and therefore your domicile. Successful non-residency claims typically require the entire immediate family to relocate.
How long does the FTB have to audit my residency?
Generally, the FTB has four years from the later of the filing deadline or the date you filed to audit a return. However, if you understated your California income by more than 25%, the period extends to six years. And if you didn’t file a required California return at all, there’s no time limit—the FTB can come after you indefinitely. This is why filing correctly from the start matters so much.
What if I moved years ago and never got audited?
Don’t assume you’re safe. The FTB can take years to initiate an audit, particularly for high-income individuals. They may be waiting until the statute of limitations is about to expire, or until a data-matching program flags your situation. If your residency change wasn’t clean, the risk doesn’t disappear—it just hasn’t materialized yet.
What happens if I lose a residency audit?
If the FTB determines you were a California resident for years you claimed otherwise, they’ll assess tax on your worldwide income for those years. You’ll owe the tax itself, plus interest from the original due date, plus penalties that can reach 25% or more of the additional tax. For high-income individuals, a multi-year residency adjustment can result in assessments of hundreds of thousands—or even millions—of dollars.
Can I appeal an FTB residency determination?
Yes. If you disagree with the FTB’s audit findings, you can protest within 60 days. If the protest doesn’t resolve the issue, you can appeal to the California Office of Tax Appeals (OTA). Beyond that, you can pursue litigation in Superior Court. Each level requires careful preparation and strong evidence supporting your position.
How Mike Habib, EA Can Help With California Residency Issues
California residency disputes require specialized knowledge of FTB procedures and audit defense strategies. My practice focuses on representing taxpayers in exactly these situations—whether you’re planning a move and want to do it right, or you’re already facing an FTB residency audit.
Pre-Move Planning
The best time to address residency issues is before you move. I work with clients planning their departure from California to identify potential problems, create documentation strategies, and structure the move to minimize FTB challenge risk. Proper planning costs far less than defending an audit years later.
FTB Audit Representation
If you’ve received an FTB residency audit notice, professional representation is critical. I handle all communication with the FTB, respond to information requests strategically, and present your case in the strongest possible light. Having an experienced representative between you and the auditor protects you from inadvertently damaging your own position.
Flat Fee Engagements: Know Your Cost Upfront
Residency audits can be lengthy and document-intensive. At large firms billing $850 to $1,500 per hour, costs can spiral unpredictably. I offer flat fee engagements for FTB residency matters, so you know exactly what you’re paying before we begin. This allows you to make informed decisions about how to proceed without worrying that every phone call and email is running up your bill.
Direct Access to Your Representative
When you engage my practice, you work directly with me—not junior staff learning on your case. Your questions get answered by the same person handling your FTB correspondence. This continuity matters in residency cases, where small details across years of records can make the difference.
Corporate Finance Background
Before establishing my tax practice, I served as Controller at Xerox Corporation and Director of Finance at AEG. This executive-level experience with complex financial matters informs how I approach residency cases involving business owners, executives, and high-net-worth individuals. I understand how businesses operate and how financial records tell a story—skills that matter when presenting your case to the FTB.
Serving Former Californians Nationwide
As an Enrolled Agent, I’m authorized to represent taxpayers before the IRS and state tax authorities regardless of location. If you’ve left California for Texas, Nevada, Florida, or any other state—or even if you’ve moved overseas—I can represent you in FTB matters. My Whittier, Los Angeles County base provides proximity to FTB offices when in-person matters arise, while serving clients wherever they now call home.
Protect Yourself Before Problems Develop
California residency issues are high-stakes matters. The tax difference between residency and non-residency can exceed 13% of your income annually. Over multiple years, that adds up to substantial money—money the FTB will pursue aggressively if they believe you left without truly leaving.
If you’re planning to leave California, invest in proper planning now. If you’ve already left and aren’t confident your departure was clean, consider a professional review before the FTB comes calling. And if you’ve received an audit notice, don’t try to handle it alone—the stakes are too high.
Contact Mike Habib, EA to discuss your California residency situation. Initial consultations are designed to help you understand your exposure and options. Flat fee quotes are available for most engagements, giving you cost certainty from the start.
Based in Whittier, Los Angeles County, California, serving former Californians nationwide and Americans living overseas.
Disclaimer: This article provides general information about California residency for tax purposes and is not intended as specific tax or legal advice for your situation. Tax laws and FTB interpretation evolve, and individual circumstances vary significantly. Consult with a qualified tax professional before making decisions about residency or responding to FTB inquiries.