Tax residency rules, audits, and the severance record (2026)
2026.1 Edition · Revised 2026-07-24 · DomusDay Research
Moving out of California is easy. Stopping California taxes is a different act, and it happens on paper: California keeps treating you as a resident until the record shows otherwise, and the burden of showing otherwise is on the taxpayer to show the FTB's residency determination is wrong; connections are weighed, not counted.
There is no day-count to get under. California defines a resident as anyone present for other than a temporary or transitory purpose — and any domiciliary who leaves for a temporary or transitory purpose. Residency is a question of fact, decided by where your closest connections are, not by a day threshold. That makes the evidence trail — where the pattern of an actual life points — the entire case. Everything on this page exists to answer one question: if FTB asks, does your record hold?
California has no fixed day threshold. Residency turns on whether presence is for a temporary or transitory purpose, judged on all facts and circumstances — where your closest connections are, not how many days you counted.
Source ↗Spending more than nine months of a taxable year in California creates a rebuttable presumption of residency. Staying under nine months creates no presumption the other way — the facts still decide.
Source ↗Options and RSUs earned during California employment remain taxable by California when exercised or vested after the move, allocated by California workdays. The move changes future earnings — not what was already earned.
Source ↗The FTB generally has four years from filing to assess additional tax — and unlimited time where no return was filed. A residency examination routinely covers multiple years of calendars, statements, and records.
Source ↗California defines a resident as anyone present for other than a temporary or transitory purpose — and any domiciliary who leaves for a temporary or transitory purpose. Residency is a question of fact, decided by where your closest connections are, not by a day threshold. Days still matter — not as a threshold to duck under, but as evidence of where the year was actually lived, and as the trigger for the presumptions below.
Selling the apartment is not the test, and neither is the new driver's license. California presumes an established domicile continues until it is shown to have changed — facts and circumstances — closest connections, with the burden on the taxpayer to show the FTB's residency determination is wrong; connections are weighed, not counted. Examiners weigh 7 primary factors — residential property, spouse and children, time in state, banking and transactions, licenses and registrations, professional services, business interests — and they weigh what you did, not what you intended. The pattern of an actual life somewhere else is the evidence; everything else is secondary.
A clean exit does not end every California claim. These rules keep taxing specific situations after the move — each one is a way the state stays in your return.
AffectsAnyone with unvested equity or deferred bonuses from California employment.
AffectsOwners of California partnerships, S corporations, and trusts.
AffectsDomiciliaries on long employment assignments outside California.
Franchise Tax Board (FTB) runs a high-intensity residency program. The FTB maintains a publicly posted Residency and Sourcing Technical Manual governing residency examinations, updated as recently as September 2025. An examination is not an argument about intentions — it is a request for documents, and the request looks like this:
Every item on that list either exists in your records from the year of the move, or it does not. That is the whole game — and why the severance record below is the section that matters most.
An audit years from now is answered with documents generated in the months around the move. This is that inventory — grouped the way examiners think about a life, each item paired with the evidence it leaves behind.
The change date is examined against the whole pattern of the year, and income events near it draw particular attention: equity compensation earned in California remains California-source when it vests or is exercised after the move, and the FTB's standard lookback is four years — a residency exam routinely reaches multiple years of records.
Examiners check the state of the driver's license and when the California license was replaced.
Voter registration and actual voting history in each state are Bragg factors examiners weigh.
Source ↗Examiners review where vehicles are registered and insured.
The state of active professional licenses is an enumerated closest-connections factor.
Source ↗Examiners compare the size, value, and use of residential property kept in California against the new home.
The county homeowner's property tax exemption claim is a specific Bragg factor — examiners check which property claims it.
Source ↗Account locations and the origination point of checking and credit card transactions are examined directly.
Where accountants and attorneys are engaged is an enumerated factor.
Where doctors and dentists are obtained is an enumerated factor; appointment records carry dates and locations.
Social, religious, and professional memberships are weighed by where they are held and used.
The location of vehicles, valuables, and personal property after the move contributes to the closest-connections pattern.
California expects Form 540NR for the change year, with income allocated to the resident and nonresident periods — the return states the change date on a signed document.
Source ↗Every rule on this page traces to one of these. When a blog and a statute disagree, the statute wins — start here.
How these are chosen, what the automated gates catch, and what this site deliberately does not do: how these guides are made →
The year of the move is filed on 540NR, with income split between the resident and nonresident periods — and that return is itself evidence: it states your change date on a signed document. Employers withhold California tax on California-source wages of nonresidents; certain non-wage California-source payments over $1,500 per year carry 7% withholding.
There is no fixed number. California residency turns on temporary or transitory purpose and closest connections, judged on all facts. More than nine months presumes residency; under six months as a genuine visitor generally supports nonresidency — but the pattern of your life decides, not the count alone.
The taxpayer, in practice: the FTB weighs closest connections — home, family, time, banking, licenses, professional services, business interests — and its determination stands unless the record shows otherwise.
Not for equity already earned. Compensation for California workdays remains California-source when it vests or is exercised after the move, allocated by workday. Only equity earned after the move — from non-California work — escapes.
Form 540NR, the combined nonresident and part-year resident return, with Schedule CA allocating income between the resident and nonresident periods.
Calendars, bank and credit card statements with transaction locations, telephone records, property and exemption records, license and registration histories, and third-party affidavits — the Residency and Sourcing Technical Manual describes the examination approach.
A California driver's license within 10 days of establishing residency and vehicle registration within 20 days — the tightest arrival windows of any state. Voter registration closes 15 days before an election, and the homeowners' property tax exemption claim is due to the county assessor by February 15 for the full first-year exemption.
There is no declaration-of-domicile instrument. The homestead exemption from forced sale is automatic — the greater of $300,000 or the countywide median home price, capped at $600,000 — with no filing required. The arrival record is built instead from the 10-day license, vehicle and voter registrations, the $7,000 homeowners' exemption claim, and day-to-day transaction geography.
When presence stops being temporary or transitory — a facts-and-circumstances question, not a date on a form. More than nine months in the state in a taxable year presumes residency, and Form 540NR covers the arrival year, allocating income between the nonresident and resident periods.
2026.1 Edition · Revised 2026-07-24 · DomusDay Research