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Will I lose my California residency if I work in another state?

by Loella Haskew, CPA 

I am a California resident but have been in school in Vermont for the last two years. I am graduating this year and returning home to California. But I will return to Vermont to work for a year beginning this fall. After that year is over, I plan to return to California permanently. Will I lose my California residency if I work in Vermont for a year?

Questions of residency are frequently judgment calls rather than black-and -white answers. There are also different rules regarding residency for different purposes. This answer focuses on the area of taxation and whether you will be subject to California tax.

The intention of the person is one of the most important indicators or where one is deemed to reside. You can be physically away from your residence for years but if you intention is to be a California resident, you will qualify since your intent is only to be away from the state for temporary purposes. To further shore up your intent, you will need to retain your California driverís license, your California voter registration, your California banking connections. The more you keep your California connections active, the more you look like a person who is coming back.

You will be subject to Vermont taxes on income earned in that state. California will tax you on that income as well. When income is subject to tax in two states, one of the states will reduce the tax with a credit that prevents double taxation.

Loella Haskew is a Walnut Creek, Calif., CPA with the firm of Buckley Patchen Riemann & Hall. You can reach her at (925) 937-2727(925) 937-2727.

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