California imposes the highest state income tax in the nation—up to 13.3% on high earners—and aggressively audits residents who claim to have left. While California hasn't enacted a formal "exit tax" (despite AB 2088 proposals), the state's residency audits, safe harbor requirements, and FTB enforcement create a de facto exit barrier that high-income individuals must navigate carefully.

This guide explains California's residency rules, how to legally terminate your California domicile, avoid triggering an audit, and successfully establish residency in a zero-tax state like Florida or Texas.

Is There a California Exit Tax?

Short answer: No formal exit tax currently exists, but California proposed one.

AB 2088 (Wealth Tax / Exit Tax Proposal)

In 2020, California Assembly Bill 2088 proposed a 0.4% annual wealth tax on net worth exceeding $30 million. The controversial provision: former residents who left California would remain subject to this tax for 10 years after leaving—creating an effective exit tax.

Status: AB 2088 did not pass. However, it demonstrates California's willingness to pursue aggressive tax policies on former residents. Similar proposals have been reintroduced in subsequent years.

The Real "Exit Tax": Residency Audits

While California doesn't have a statutory exit tax, it achieves a similar effect through:

Aggressive residency audits: The Franchise Tax Board (FTB) audits high-income individuals who claim non-residency
Burden of proof on taxpayer: You must prove you left; California assumes you're still a resident
Safe harbor requirements: Strict rules for demonstrating you've truly left
Multi-year lookback: FTB can audit returns up to 4 years after filing (longer if fraud suspected)

For high-income earners, a failed residency audit can result in hundreds of thousands of dollars in back taxes, penalties, and interest.

California Residency Rules

California uses two tests to determine residency: domicile and safe harbor.

Domicile Test

Your domicile is your permanent home—the place you intend to return to. California presumes you are domiciled in California if:

You maintain a residence in California
California is your primary home base
You have stronger ties to California than any other state

To terminate California domicile, you must:

Abandon California domicile: Physically move out and sever ties
Establish new domicile elsewhere: Create ties to a new state with intent to stay

Critical: You must do BOTH. Simply leaving isn't enough—you must affirmatively establish a new domicile.

Safe Harbor Test

Even if you claim domicile elsewhere, California can still tax you as a resident unless you meet safe harbor requirements.

Safe Harbor Rule: You're presumed to be a California non-resident if:

You spend fewer than 45 days in California during the tax year, AND
You don't have a permanent place of abode in California during the year

If you spend 46+ days in California, you're not automatically a resident, but California may audit you and require you to prove non-residency through the domicile test.

What Counts as a "Day" in California?

Any part of a day counts as a full day. This includes:

Landing at LAX at 11:00 PM (1 day)
Driving through California to another state (1 day per day of travel)
Layovers (if you leave the airport)
Working remotely from California

Tracking is critical: Keep a day log, travel receipts, flight confirmations, and credit card statements showing your location.

How to Leave California Successfully

Leaving California and avoiding FTB audits requires deliberate actions to prove you've terminated domicile.

Step 1: Establish Domicile in a New State

Choose a zero-tax state and take affirmative steps to establish domicile there:

Top zero-tax states for California exits:

Florida: Popular for retirees, no estate tax
Texas: Strong economy, no state income tax
Nevada: Close to California, popular for business owners
Washington: No income tax (but 7% capital gains tax on high earners)

Actions to establish new domicile:

Secure a residential street address (not P.O. Box)
Get a driver's license in your new state
Register to vote in new state
Register vehicles in new state
File Declaration of Domicile (in states that offer it, like Florida)

Step 2: Sever California Ties

The more ties you cut with California, the stronger your case:

Critical actions:

Sell or rent out your California home: If you keep it, make it clearly secondary (rent it out long-term)
Surrender California driver's license: Physically turn it in to your new state DMV
Cancel California voter registration: Must be done affirmatively
Change all mailing addresses: Banks, credit cards, investment accounts, insurance
Update professional licenses: Change state bar, medical licenses, etc.
Close California-specific accounts: State credit unions, local gym memberships
Transfer business operations: If you own a business, move operations or change state of incorporation
Update social media: Change "home" location on Facebook, LinkedIn, etc.

Step 3: Spend Time in Your New State

While your new state may not require minimum days, spending significant time there strengthens your case:

Ideal: Spend more days in new state than in California
Safe harbor: Keep California days under 45
Document: Keep calendars, travel receipts, credit card statements showing where you were

Step 4: Update Financial Institutions

Update every financial institution to your new address:

Banks and credit unions
Brokerage accounts
Credit card companies
Retirement accounts (401k, IRA)
Insurance (health, auto, home, life)
Employer (W-2, payroll)

Why it matters: FTB cross-references financial records during audits. Consistency is critical.

Step 5: File as Part-Year Resident (If Mid-Year Move)

If you moved mid-year, file California Form 540NR (part-year resident return):

Report worldwide income for the period you were a California resident
Report only California-source income for the period you were a non-resident
Clearly indicate your exit date

Exit date: The day you physically left California with intent not to return as a resident.

Step 6: File as Non-Resident (Subsequent Years)

In years after your move, file Form 540NR (non-resident) only if you have California-source income:

Rental income from California property
Wages earned working physically in California
Business income from California operations

If you have zero California-source income and spent fewer than 45 days in the state, you may not need to file a California return at all.

Common Audit Triggers

California FTB targets certain situations for residency audits:

High-Income Taxpayers

If your income exceeds $1 million, expect heightened scrutiny. The FTB knows the tax revenue at stake is significant.

Keeping a California Home

Maintaining a California residence—even if rented out—can trigger audits. FTB may argue it's your "permanent place of abode."

Mitigation: Rent it out on a long-term lease to unrelated tenants. Document that you have no access to the property.

Spending 46+ Days in California

Exceeding the 45-day safe harbor invites scrutiny. FTB will demand proof of your new domicile.

California Business Ties

Owning a California-based business, serving as a board member, or working remotely for a California employer can all trigger audits.

Family Still in California

If your spouse or children remain in California while you claim to live elsewhere, FTB may argue you haven't truly left.

Audit Defense: What You Need to Prove

If audited, you must prove you abandoned California domicile and established a new one. Evidence includes:

1. Intent to Leave California

Sale or rental of California home
Surrendered California driver's license
Cancelled California voter registration
Updated all accounts to new address
Moved belongings out of California

2. Intent to Establish New Domicile

Driver's license in new state
Voter registration in new state
Residential address (lease or deed)
Declaration of Domicile (if applicable)
Joined community organizations in new state

3. Time Spent in Each Location

Day log or calendar
Travel receipts (flights, hotels)
Credit card statements showing transaction locations
Passport stamps (if traveling internationally)

4. Financial and Professional Ties

Bank statements showing new state address
Professional licenses updated
Business operations moved or clearly separated
Income sourced from new state or internationally

Special Cases

Moving Abroad While Leaving California

If you're leaving California to live abroad, establish domicile in a zero-tax state before going abroad:

Pick a zero-tax state (Florida, Texas, Nevada, etc.)
Secure a residential address (use address service if needed)
Get driver's license and register to vote
Then move abroad

This creates a clean break from California and establishes your US domicile in a tax-friendly state.

See our guides on Florida residency for digital nomads and expat tax filing.

Snowbirds (Splitting Time Between States)

If you split time between California and another state:

Track your days meticulously
Spend fewer than 45 days in California (safe harbor)
Make new state your domicile (driver's license, voter registration, primary address)
Ensure stronger ties to new state than California

Business Owners

If you own a California-based business:

Document that you're not involved in day-to-day California operations
Hire local management in California
Operate from your new state (not California)
Consider changing business structure or moving headquarters

California vs. Other High-Tax States

California is the most aggressive, but other states also audit exits:

State	Top Tax Rate	Audit Aggressiveness	Safe Harbor
California	13.3%	Very High	<45 days + no PPA
New York	10.9%	Very High	≤183 days + no PPA >10 months
New Jersey	10.75%	High	No formal safe harbor
Virginia	5.75%	Moderate	Domicile-based

Tax Savings by Leaving California

Here's what high-income earners save by establishing residency in a zero-tax state:

Annual Income	California Tax	Zero-Tax State	Annual Savings
$200,000	~$16,000	$0	$16,000
$500,000	~$56,000	$0	$56,000
$1,000,000	~$133,000	$0	$133,000
$5,000,000	~$665,000	$0	$665,000

Estimates include California's 13.3% top rate. Actual savings depend on income composition and deductions.

Tools and Resources

Your Tax Base Residential Address Services: Establish domicile in Florida, Texas, or Nevada with compliant address setup
Mail Forwarding: Maintain your new state address while traveling
Tax Filing for Former California Residents: Work with CPAs experienced in residency audits
California FTB: Official residency guidelines

Frequently Asked Questions

Can California tax me after I leave?

Only on California-source income (wages earned in CA, rental income from CA property, etc.). If you properly terminate residency, your out-of-state income is not taxable by California.

How long until I'm "safe" from California audits?

California can audit returns for 4 years after filing. Keep documentation for at least 6-7 years after your last California return.

What if I keep a vacation home in California?

Risky. California may argue it's your "permanent place of abode." If you must keep it, rent it out long-term and document you don't use it personally.

Can I ever visit California after I leave?

Yes, but stay under 45 days per year to maintain safe harbor. Track every day carefully.

Do I need to sell my California home?

Not required, but it's the cleanest break. If you keep it, rent it out and make your new state home clearly primary.

What about remote work for a California company?

If you work remotely from another state, those wages are not California-source income. However, any days worked physically in California are taxable by CA.

Can I claim a new state domicile while living abroad?

Yes. Establish domicile in a zero-tax state before moving abroad. See our Florida residency for expats guide.

Final Thoughts

Leaving California is one of the most impactful tax moves for high-income individuals, potentially saving $50,000 - $650,000+ annually. However, California's aggressive enforcement means you must execute your exit flawlessly.

Key takeaways:

California has no formal exit tax, but residency audits create a de facto barrier
You must abandon California domicile AND establish new domicile elsewhere
Keep California days under 45 for safe harbor protection
Sever all ties: sell/rent home, cancel voter registration, surrender license
Document everything—you'll need it if audited

Ready to leave California and establish residency in a zero-tax state? Your Tax Base provides residential addresses in Florida, Texas, and Nevada with full documentation, mail forwarding, and compliance support. Get started today or contact us for personalized guidance.

California Exit Tax: What You Need to Know