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State Income Tax


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#1 El Demonio

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Posted 29 January 2011 - 12:20 PM

I no longer consider myself a resident of California - CA (moved to MX July 2009, and to a second home in NV July 2010) and wonder how I go about not having to pay CA state income tax (approximately $8K per year) on my pension income? I'm in MX on an FM3 and have a Jalisco driver's license. The problem (or not - don't know) is that while no longer a resident of CA, I still have a presence there because of real and personal property. Below are some of the details and would appreciate any insight from those who have been there done that (successfully ended residency in a income tax state).

I have homes in MX, NV (both leased) and CA (owned). My lease in MX covers all of 2010 and in NV (a no income tax state) for the last six months of 2010. I did a "strategic walk-away" (stopped paying the mortgage) on the CA home two years ago, since it's no longer worth what I owe (figured losing $250K was enough! - which BTW can't even be claimed as a capital loss). My girlfriend and her minor children live there (rent free) while my realtor tries to unload it for me as a "short sale". I stay with them when I travel to CA to visit family and friends, and still receive mail there. I own two cars and a motorcycle. One vehicle is registered in SD and the others in CA. All three show garaged in CA for insurance purposes, since I still have a CA driver's license, but not one in NV yet.

What do you guys think - am I clear or not? TIA

#2 hensley

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Posted 30 January 2011 - 06:53 AM

Don't know about CA but we are from AZ and we paid state tax. We sent a letter to the Secretary of State with copies of our MX drivers license and Visa's and we have not paid or heard anything since. Don't know if this is of any help. We do not own any homes there.
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#3 jailbait

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Posted 30 January 2011 - 08:21 AM

The instructions to the form 540 have definitions of who is subject to state tax. it's available online

#4 DaveP

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Posted 30 January 2011 - 08:50 AM

I no longer consider myself a resident of California - CA (moved to MX July 2009, and to a second home in NV July 2010) and wonder how I go about not having to pay CA state income tax (approximately $8K per year) on my pension income? I'm in MX on an FM3 and have a Jalisco driver's license. The problem (or not - don't know) is that while no longer a resident of CA, I still have a presence there because of real and personal property. Below are some of the details and would appreciate any insight from those who have been there done that (successfully ended residency in a income tax state).

I have homes in MX, NV (both leased) and CA (owned). My lease in MX covers all of 2010 and in NV (a no income tax state) for the last six months of 2010. I did a "strategic walk-away" (stopped paying the mortgage) on the CA home two years ago, since it's no longer worth what I owe (figured losing $250K was enough! - which BTW can't even be claimed as a capital loss). My girlfriend and her minor children live there (rent free) while my realtor tries to unload it for me as a "short sale". I stay with them when I travel to CA to visit family and friends, and still receive mail there. I own two cars and a motorcycle. One vehicle is registered in SD and the others in CA. All three show garaged in CA for insurance purposes, since I still have a CA driver's license, but not one in NV yet.

What do you guys think - am I clear or not? TIA


You should talk to traderspoc on this board. You can PM him. He has prepared US taxes for many years and will be I am sure well aware of the US/Mexico tax treaty. I prepared taxes in Canada for many years including US/Canada Tax Treaty questions but I don't feel qualified to get involved with US taxes in Mexico.

DaveP

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#5 tomgates

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Posted 30 January 2011 - 08:51 AM

Generally if you are a resident for part of the year in CA, you would file pro-rata. If you own property in two states, one with income tax and one without, and you claim residency in the one without, you have to prove residency in some manner, voter registration, drivers license, etc. You can probably google it or just talk to an accountant. There are many examples of people that have lived in a high income tax state, like Illinois or Maryland that when those states raised the rates, many "rich" people vanished from the tax roles of the income tax state! Find out what they did.
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#6 jrm30655

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Posted 30 January 2011 - 11:22 AM

I don't know how CA looks at it, but the Feds require 330 days out of country per year to be "foreign domiciled citizen".

"Generally" you "live" in the state where you spend 1/2 year + 1 day out of the year.

I used to buy and rebuild and flip houses. To do it tax free, you need to have it as a primary residence for two years. The day that I closed on one, I would go get my drivers license changed and put in a change of address at the post office. Those two things were always good enough to establish residence.

If you have an address in NV, I'd have everything mailed there and get a drivers license in NV. Better still, get a PO Box with Handy Mail or Mail Boxes and have all your mail forwarded to Mexico. The address is Laredo, TX, another state with no income tax.

I recently saw an article on some of the states trying to collect on pensions from within a state where the recipient lived out of state. I cannot find the article now and don't remember what the outcome was.

#7 jrm30655

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Posted 30 January 2011 - 11:28 AM

There's an article here that may help:

http://www.taxtrimme...ualretire.shtml

#8 pera

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Posted 30 January 2011 - 11:28 AM

California needs the money.
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#9 gringal

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Posted 30 January 2011 - 01:06 PM

California needs the money.


LOL! California ALWAYS needs the money. Lived there all my life until moving to Mexico. When times are good and the taxes roll in, the state spends like there's no tomorrow........and when times aren't so good, they're stuck with the expenses they set themselves up for in the good times. And, if they can manage it...they want you as a resident forever. It's not easy leaving CA. :rolleyes:

#10 El Demonio

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Posted 30 January 2011 - 01:58 PM

It's not easy leaving CA. :rolleyes:

Unfortunately, I'm finding that out the hard way. My circumstances forced me to do it piece meal, but that doesn't fly in California. I need to sell my CA property first, since as Spencer correctly pointed out on TOB, primary residency in the subject property is a condition of a "short sale" and the "Debt Forgiveness Act". After that it'll be time to abandon the good ship California for good! I'd like to continue donating $8K per year to their wonderful social programs, but I think I can find better things to spend my hard-earned money on. Too bad there's no way to avoid the IRS, but I can live with that.

A BIG THANKS to all who replied to my post.




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