Leaving California residency is one of the most important financial decisions you can make if you're relocating to a zero-tax state like Florida, Texas, Nevada, or Washington. California has the highest state income tax in the nation—up to 13.3%—and the California Franchise Tax Board (FTB) is notorious for aggressively auditing former residents who claim they've left.

Simply moving out of California and buying a home in another state is not enough to terminate California residency. The FTB evaluates hundreds of factors to determine if you've truly changed your domicile, and mistakes can result in years of back taxes, penalties, and interest. This comprehensive guide walks you through the exact steps to legally exit California residency, avoid FTB audits, and establish domicile in a zero-tax state.

Understanding California Residency vs. Domicile

California uses two concepts to determine tax liability: residency and domicile. Understanding the difference is critical.

What is Domicile?

Your domicile is your permanent, legal home—the place you intend to return to whenever you're away. You can have only one domicile at a time. To change your domicile from California to another state, you must:

Physically move to the new state
Abandon your California domicile
Intend to remain in the new state indefinitely

Domicile is subjective and based on intent, which the FTB determines by examining your actions and ties to California vs. your new state.

What is Residency?

Residency is determined by physical presence. California Revenue and Taxation Code Section 17014 defines you as a California resident for tax purposes if you are in California for other than a temporary or transitory purpose, or you are domiciled in California but outside the state for a temporary or transitory purpose.

Even if you're not domiciled in California, you're still considered a resident if you spend more than 9 months (approximately 275 days) in California during the tax year, unless you can prove your purpose was temporary.

The 9-Month Presumption

If you spend more than 9 months in California during a tax year, California presumes you are a resident for tax purposes. To overcome this presumption, you must provide clear and convincing evidence that your presence was temporary (e.g., you were caring for a sick family member, working on a temporary project, etc.).

Why Leaving California is So Difficult

The California Franchise Tax Board is one of the most aggressive state tax agencies in the U.S. Every year, they audit thousands of former residents who claim they've left California, often going back multiple years to assess back taxes.

California's Revenue Incentive

California has a strong financial incentive to retain high-income taxpayers. A single taxpayer earning $1 million per year pays approximately $133,000 in state income tax. If that person moves to Florida or Texas (zero income tax), California loses $133,000 annually. Multiply that by thousands of high earners, and you understand why the FTB scrutinizes exits so carefully.

Common FTB Audit Triggers

You sold California real estate or equity after claiming to leave
You maintain a California driver's license or vehicle registration
You're registered to vote in California
Your spouse or children remain in California
You have a California mailing address or mail forwarding service
You maintain professional licenses in California
You spend significant time in California (even under 9 months)
You have business ties or income from California sources

The FTB can and will subpoena credit card statements, cell phone records, EZ Pass tolls, social media posts, gym memberships, and even your children's school records to determine where you actually live.

Step-by-Step Guide to Leaving California Residency

Follow these steps carefully to minimize your audit risk and successfully terminate California residency.

Step 1: Choose Your New Domicile State

The most popular zero-tax states for former Californians are:

Florida (no state income tax, strong homestead protection)
Texas (no state income tax, business-friendly)
Nevada (no state income tax, close to California)
Washington (no state income tax, tech hub)
Tennessee (no wage income tax)
Wyoming (no state income tax, privacy-friendly)

Important: You must actually move to the new state and establish genuine ties. You cannot establish domicile in a state where you don't live.

Step 2: Physically Move and Spend the Majority of Your Time Outside California

This is the most important step. You must:

Physically relocate to your new state
Spend more time in your new state than in California
Ideally, spend fewer than 45 days in California during the first year after your move (to avoid the Safe Harbor issues discussed below)

Track every day: Keep a detailed log of your whereabouts, including dates, locations, and purpose of travel. Save boarding passes, hotel receipts, and any other documentation proving where you were on each day of the year.

Step 3: Sell or Rent Out Your California Home

Continuing to own a home in California is a major red flag for the FTB. If possible:

Sell your California residence before the end of the tax year you leave
If you cannot sell immediately, rent it out on a long-term lease (12+ months) to demonstrate you no longer treat it as your home
Do not use it for personal purposes after renting it out
Convert it to a rental property and file California non-resident tax returns reporting only the rental income

If you keep a vacation home in California, make sure it's clearly secondary to your new primary residence (smaller, used infrequently, etc.).

Step 4: Purchase or Rent a Home in Your New State

Establish a permanent residence in your new state by:

Buying a home (demonstrates commitment and permanence)
Signing a long-term lease (12+ months minimum)
Making your new residence larger, nicer, or more expensive than any California property you still own
Furnishing it and moving your personal belongings

The FTB looks at the relative size, cost, and use of your residences. If your California home is a 5,000 sq ft mansion and your Texas home is a 1,200 sq ft apartment, the FTB will argue California is still your true home.

Step 5: Update Your Driver's License and Vehicle Registration

Within 10-30 days of moving (depending on your new state's rules):

Obtain a driver's license in your new state
Surrender your California driver's license (some states require this; if not, cut it up)
Register your vehicles in your new state
Cancel California vehicle registration and return license plates

Critical: Do not delay this. Keeping a California driver's license is one of the strongest pieces of evidence the FTB uses to argue you never truly left.

Step 6: Register to Vote in Your New State

Register to vote in your new state and cancel your California voter registration. Voting in California elections after claiming non-residency is a major red flag.

Step 7: Update Professional Licenses and Memberships

Change the address on all professional licenses (medical, legal, real estate, etc.) to your new state address
If you maintain a California professional license for work purposes, ensure your primary license and address are in your new state
Update memberships (gyms, clubs, alumni associations) to your new address
Cancel California-based memberships you no longer use

Step 8: Establish Banking and Financial Ties in Your New State

Open checking and savings accounts at a bank in your new state
Use your new-state accounts for day-to-day transactions
Update the address on all financial accounts (banks, credit cards, brokerage, retirement accounts)
Close California-only bank accounts if possible (or at least change them to out-of-state addresses)

Step 9: Update Estate Planning Documents

Execute a new will, trust, and power of attorney under the laws of your new state
State in your documents that you are a resident/domiciliary of your new state
Use an attorney in your new state to draft these documents

Step 10: File a Declaration of Domicile (if available)

Some states, like Florida, allow you to file a Declaration of Domicile with the county clerk. This is a sworn statement that you intend to make that state your permanent home. While not conclusive, it's strong evidence of your intent.

Step 11: Update Medical, Dental, and Other Service Providers

Establish relationships with doctors, dentists, and other professionals in your new state
Transfer medical records to your new providers
Cancel or reduce use of California providers

Step 12: Move Your Businesses and Business Addresses

If you own a business, update the principal place of business to your new state
File dissolution or withdrawal paperwork for California LLCs/corporations if they're no longer operating in California
Form new entities in your new state if necessary
Update business licenses and permits

Step 13: Terminate California-Specific Ties

Close California-based storage units (or move contents out of state)
Cancel California memberships and subscriptions
Update Amazon, online retailers, and streaming services to your new address
Remove yourself from California mailing lists

Step 14: Limit Your Time in California

Spend as little time as possible in California, especially during your first year as a non-resident. Ideally:

Under 45 days if you want to claim Safe Harbor (discussed below)
Under 183 days to avoid statutory residency in most states
Under 9 months (275 days) to avoid California's 9-month presumption

Track every day you spend in California and document the purpose (business meeting, family visit, etc.).

Step 15: File California Non-Resident Tax Returns

For your first year as a non-resident, you'll file a part-year resident return (Form 540NR) reporting:

All income (from all sources) for the portion of the year you were a California resident
Only California-source income for the portion of the year you were a non-resident

For subsequent years, file Form 540NR (non-resident) if you have California-source income (e.g., rental income, business income from California sources).

Important: Clearly indicate your date of departure from California on your part-year return. This is the date you physically moved out and abandoned California domicile.

California Safe Harbor Rule

California has a Safe Harbor provision that presumes you are a non-resident if you meet all of the following criteria:

Safe Harbor Requirements

You were outside California for at least 546 consecutive days (approximately 18 months)
Your spouse (if any) was also outside California for the same period
You did not have a California abode available to you for more than 60 days during the 546-day period
You were not in California for more than 45 days during the 546-day period
You did not engage in any activity in California that would indicate you maintained a domicile (e.g., active business management, professional services)

If you meet all these requirements, California presumes you are not a resident for the tax years that fall within the 546-day period.

Limitations of Safe Harbor

It only applies if you meet all five requirements—missing one disqualifies you
It's a presumption, not a guarantee—the FTB can still challenge it if they have evidence you maintained California domicile
It requires you to stay out of California almost entirely for 18 months, which is impractical for many people with family or business ties

Bottom line: Safe Harbor is helpful if you can meet the requirements, but most people cannot. Focus on the domicile factors instead.

California's Domicile Factors

California Regulation 17014 lists numerous factors the FTB considers when determining domicile. No single factor is determinative—the FTB looks at the totality of circumstances.

Key Domicile Factors

Factor	California Ties (Bad)	New State Ties (Good)
Time spent	More days in California	More days in new state
Size/value of homes	California home is larger/nicer	New state home is larger/nicer
Family location	Spouse/kids in California	Spouse/kids in new state
Driver's license	California license	New state license
Vehicle registration	California registration	New state registration
Voter registration	Registered in California	Registered in new state
Professional licenses	California address	New state address
Bank accounts	California banks	New state banks
Religious/social ties	California church, clubs, orgs	New state church, clubs, orgs
Medical providers	California doctors/dentists	New state doctors/dentists
Business location	California business activity	New state business activity
Personal property	Valuables, heirlooms in CA	Valuables, heirlooms in new state

The more factors you can shift toward your new state, the stronger your case for non-residency.

What About My Spouse and Children?

If your spouse and children remain in California while you move to another state, the FTB will almost certainly argue that California remains your domicile. Courts have consistently held that your family's location is one of the strongest indicators of domicile.

Solutions

Move your entire family to your new state
If your spouse must remain in California temporarily (e.g., to finish a job or sell a home), document that it's temporary and that you intend to reunite in your new state as soon as possible
Consider filing separate state tax returns (Married Filing Separately) if your spouse remains a California resident—consult a tax professional

California Non-Resident Tax Return (Form 540NR)

If you successfully leave California residency, you'll file Form 540NR (California Nonresident or Part-Year Resident Income Tax Return) for the year you leave and all subsequent years if you have California-source income.

What is California-Source Income?

As a non-resident, you're only taxed on income from California sources, including:

Wages for services performed in California
Income from a California business or partnership
Rental income from California real estate
Sale of California real estate
Income from a California S-corporation or LLC (if doing business in California)

Not California-source income:

Wages for work performed outside California (even if paid by a California employer)
Interest and dividends from investments (unless from a California business)
Capital gains from selling stocks, bonds, etc. (unless from California real estate or business)

Part-Year Resident Return

In the year you move, you'll file as a part-year resident:

Resident period: Report all income (from all sources) for the portion of the year you were a California resident
Non-resident period: Report only California-source income for the portion of the year you were a non-resident

Your date of departure is critical—it's the date you physically moved out and abandoned California domicile.

What Happens if You're Audited?

If the FTB audits your residency status, they will request extensive documentation, including:

Day-by-day location logs with supporting evidence
Credit card and bank statements
Cell phone records
Flight and hotel records
Lease or mortgage documents for all residences
Utility bills
Driver's license, vehicle registration, voter registration records
Medical and dental records
Children's school records
Country club or gym membership records
Business records and client locations
Social media posts showing your location

The burden of proof is on you to demonstrate you changed your domicile. Incomplete or inconsistent documentation can result in the FTB denying your non-resident status and assessing back taxes, penalties, and interest.

Penalties for Failing to Establish Non-Residency

Back taxes on income you thought was not subject to California tax
Underpayment penalties (typically 20-40% of the tax owed)
Interest accruing from the original due date
Potential fraud penalties if the FTB believes you intentionally misrepresented your residency

For high earners, this can easily result in six- or seven-figure tax bills.

Common Mistakes When Leaving California

1. Keeping a California Driver's License

This is the #1 mistake. Get your new state driver's license immediately and surrender your California license.

2. Spending Too Much Time in California

Even if you own a home in another state, spending 200+ days in California makes it nearly impossible to argue you've changed your domicile.

3. Keeping Your Spouse and Children in California

The FTB views this as strong evidence you intend to return to California. Move your family with you.

4. Maintaining a Large California Home While Renting a Small Apartment Elsewhere

The relative size and value of your homes matters. If your California property is clearly your "main" home, the FTB will argue you never left.

5. Not Documenting Your Move

Assume you will be audited and keep meticulous records of everything: moving receipts, lease agreements, day logs, flight records, etc.

6. Selling California Assets Shortly After Claiming Non-Residency

If you sell a business, home, or stock options within 1-2 years of leaving California, the FTB may argue the move was a temporary tax dodge and that you were still a California resident when the income was earned or the gain accrued.

Establishing Domicile in a Zero-Tax State

To successfully leave California, you must not only abandon California domicile but also establish domicile in your new state. Here's how:

Florida Domicile

Florida is the most popular destination for former Californians due to its zero income tax, homestead exemption, and strong asset protection laws. To establish Florida domicile:

Purchase or rent a home in Florida and spend the majority of your time there
File a Declaration of Domicile with the county clerk (costs ~$10)
Obtain a Florida driver's license within 30 days of moving
Register your vehicles in Florida
Register to vote in Florida
Apply for Florida homestead exemption if you own a home
Update all addresses to your Florida address

Your Tax Base specializes in helping former Californians establish Florida domicile. We provide a physical street address, lease documentation, utility bills, and mail forwarding to ensure IRS and FTB compliance. Plans start at $14.99/month.

Texas Domicile

Purchase or rent a home in Texas
Obtain a Texas driver's license within 90 days
Register vehicles in Texas
Register to vote in Texas
Apply for homestead exemption
Update all professional licenses and addresses

Nevada Domicile

Nevada has no income tax and is geographically close to California
Obtain a Nevada driver's license within 30 days
Register vehicles in Nevada
Register to vote in Nevada
Establish Nevada banking and business ties

Frequently Asked Questions (FAQ)

How long do I have to live outside California before I'm considered a non-resident?

There's no specific time requirement. You become a non-resident the day you physically move out and abandon your California domicile with the intent not to return. However, the longer you stay away and the stronger your ties to your new state, the easier it is to defend your non-resident status.

Can I keep a vacation home in California after I leave?

Yes, but it's risky. Make sure it's clearly secondary to your new primary residence (smaller, used infrequently) and spend the majority of your time in your new state. Track your days carefully.

What if I work remotely for a California company?

If you physically perform the work outside California, the income is generally not California-source income (with some exceptions for equity compensation). Consult a tax professional.

Do I need to sell my California rental property?

No. Rental income from California property is California-source income and will be taxed on your non-resident return, but owning rental property alone won't make you a California resident.

Can I establish domicile in a state where I don't spend much time?

No. You must actually live in your new state to establish domicile there. You can't claim Texas domicile while spending 300 days per year in California.

How does the FTB find out I'm still spending time in California?

Credit card transactions, cell phone GPS data, EZ Pass/FasTrak records, social media posts, security camera footage, airline records, hotel records, and more. Assume the FTB can track your location.

What if I'm audited 3 years after I left California?

California has a 4-year statute of limitations for residency audits (longer if fraud is suspected). Keep all documentation for at least 4 years after leaving.

Can I change my domicile mid-year?

Yes. You'll file a part-year resident return for that year, reporting all income as a resident for the portion of the year before you left, and only California-source income for the portion after you left.

Does establishing an LLC in another state help?

Not by itself. The FTB cares about where you live, not where your business is registered. However, moving your actual business operations to another state is a strong factor in your favor.

What about the "close connection" exception?

Some states have a "close connection" test that can make you a non-resident even if you spend 183+ days there, but California does not recognize this. If you spend more than 9 months in California, you're presumed to be a resident unless you can prove your purpose was temporary.

Final Thoughts

Leaving California residency can save you hundreds of thousands or even millions of dollars over your lifetime, but it must be done correctly. The California Franchise Tax Board is aggressive, well-funded, and will scrutinize every aspect of your move. Half-measures or "technical" compliance without actually changing your life will not work.

Key takeaways:

Physically move to your new state and spend the majority of your time there
Sell or rent out your California home
Update everything: driver's license, vehicle registration, voter registration, bank accounts, professional licenses, medical providers, etc.
Limit your California days to under 45 (ideally) or at least under 183
Move your family with you—don't leave your spouse and kids in California
Document everything—assume you will be audited
Establish strong ties to your new state (home, job, social connections)

Ready to make the move? Your Tax Base helps you establish Florida domicile with a physical street address, lease documentation, utility bills, and mail forwarding for IRS and FTB compliance. Plans start at $14.99/month. Contact us today to start saving on taxes.

How to Leave California Residency: Complete 2025 Exit Guide