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. (more…)