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.
I live in California for the entire 2017. But my husband lived in Wisconsin from 1/2017 to 6/2017, then moved to Texas. We have the federal tax return as married filing jointly. Can I report the CA tax as married filing separately? And do we have to pay CA tax for my husband’s income if we want to report the CA tax as married filing jointly? Thanks.
I am a resident of California. I sold a inherited property in India and paid taxes in India for capital gains (23.6%)
IRS has reciprocity understanding with foreign governments, and I understand that the US will offset any taxes paid to India’s tax authority, against any taxes that the US would levy on that income.
My CPA says that I would have to pay California income tax on the entire sum of money that I earned in India even if I had paid taxes on it in India. He said that I would not be able to offset the California tax, by the taxes paid in India.
I understand that the state of California wants its residents to report any and all income from the whole world, and has the right to tax all income, but will give credit for taxes paid to the local authorities outside of California.
Did I get the right advise from my CPA that I still need to pay California state taxes on the sale of my inherited property?
I would advise that you follow the advice that your CPA has given to you. Being certified for a specific state does take a lot of rigorous testing and knowledge. If you would like to get another perspective, you may want to consult with another CPA of CA.
I am a Texas Resident, working a contract job in Texas for a California based company who has contracted with the Texas Company to fill the needed roles. Do I owe California taxes?
Any income earned within another state is subjected to taxation from said state. If it is indicated on your 1099-MISC or income statement that you receive when it comes time to file, a state return is required for the indicated state on your statement.
Hey Guys,
I am in a similar situation as Michael, except I am worked for a California company on w-2. I performed the work in Houston (location of my residence), for Texas clients. The w-2 lists a California tax amount… Do I need to pay California taxes?
If I become a resident of the “no Tax” state of NV before the end of the calen day year, and I made income in CA during the year, can I excuse myself from State Taxes on income from CA? What about capital gains….same senario?
Your income is subjected to taxes in the state that you earn it from, so you will not be able to avoid being taxed in your respective state. You will need to file a part-year resident tax return with CA in order to pay any taxes due or claim a refund if you paid excessive taxes. This also applies to your capital gains as well, if your capital gains were earned during your CA residency.
I moved to Washington from California in December of 2014 for a new job and have worked in Washington ever since. My employer incorrectly listed my old California residence on my W2 and now the state says I owe them tax money. I have signed two leases here BUT… I never switched over my driver’s license and still have my car registered in California – although that will change soon. Am I doomed to pay California tax even though I haven’t lived or earned any money there in almost three years?
Hello William,
The possibility that CA is still considering you a resident is very probable. I would recommend contacting the CA Franchise Tax Board to find an exception. Although CA is known to be unyielding over these Out-of-State cases.