Yes, California taxes income earned from ALL state sources.
If you’re a California resident, you’re no stranger to high tax rates. In fact, you pay the highest income tax in the country!
Here’s another fact: if you earned income working in another state, you’ll still be forced to pay the same, high California tax rate, even if that other state has a lower tax rate.
According to CA.gov, California residents are “taxed on ALL income, including income from sources outside California.”
What About Income From a Non-Income Tax State?
If you earned income in one of the seven states that doesn’t assess income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming), or one of the two states that have no tax on wages (Tennessee and New Hampshire), you’re still required to pay tax on that income to the state of California.
So, let’s say you work remotely from your home in San Diego for a company located in Texas. When filing, you’ll report this income on your California tax return. You’ll also pay a chunk of CA tax on it.
The one piece of good news is that you won’t need to file a non-resident tax return to the tax-free state. You’ll only be required to file a resident return to California.
How Do I Report the Income I Earned?
If you’re a California resident, you’ll need to file a California resident tax return and report ALL the income you earned during 2014, regardless of the state you earned it in.
You’ll also need to file a non-resident tax return for the state you earned the non-California income in and pay tax on the income earned in that state. California does not have any reciprocal agreements with any other states regarding taxes. This means you have to file state tax returns for both states unless it’s an income tax-free state.
For example, if you had two jobs in 2014, one in Santa Barbara and the other in Phoenix, AZ, you’ll report the amount you earned from your job in Phoenix on a non-resident Arizona tax return and the earnings from both jobs on your California resident return.
Is there an easy way to file my multi-state taxes?
Yes! In fact, you won’t have to bother searching for and filling out multiple tax returns. With Rapidtax, you’ll only need to enter your income information once and we’ll do the rest of the work for you.
While you’re at it, you can get your federal tax return out of the way too! To get started, create an account on RapidTax and enter your tax information.
If you have questions along the way, don’t hesitate to reach out to the RapidTax team.
Part question, part comment.
Comment – 3 months in TX, 9 months in CA. That’s super rude CA, employers can pay less in those non-taxing state because there’s no income tax, so why would you penalize people for living there…
Question – If I moved from TX to CA, can I file the part year return, and have CA only tax the time I’m in CA? I’m getting a ‘no’ feeling from the blog/comments.
It’s all dependent on how it is reported on your income statement. You will need to consult with your payroll department, however the finalized form will be what you will have to report to the state. Having a discussion with your payroll departments reporting of your income earnings may give you a better idea as to how to file your state tax return forms.
If I was a resident of CA from January to May 2016 and then permanently moved to Colorado in June 2016, do I have to pay CA taxes on my CO income?
It would be best to prepare a part year return since you resided in two states in 2016. CA will tax the income that was earned in CA during your period of residency and CO will tax the income you earned in CO. Rapid tax expertly handles part year returns. Click here to get started today.
Does California give a credit for income taxes paid to Virginia when I was a part-year resident in Virginia for 8.5 months and a California resident for the whole year?
If you were a resident of CA for the entire year and you earned income in VA (non-resident), you can receive a resident credit from CA for taxes paid to VA.
However, if you resided in both CA and moved to VA (part year), you will have to allocate the income earned based on the dates of residency for each state. Here you will not receive a credit. Rapidtax expertly prepares Resident, Part-year and Non-Resident returns. Clickhere to get started today.
Does a mailing address in California count as residency? Ive lived and worked in a state other than California for the entirety of 2016. I’ve obtained a driver’s license, signed a lease, and paid utilities for an address outside of California, while maintaining a California mailing address for employment purposes. Now, as I’m filing taxes, if I list my residency as the state where I maintain a physical address, the calculations show that I OWE california $400! How is this possible??
…I know, I’m a tax idiot.
Hi ZR,
The state could be calculating this based on California being your home of record. You should update your address with them or show them documentation proving your state residency.
Very helpful information