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Welcome to Nevada

A gold rush motivated multitudes to migrate through Nevada on their way to California in the mid-1800’s and inspired the state’s nickname—the Golden State.

Today, a reverse relocation of sorts is happening as people trade in the Golden for the Silver State.  While its crowded roadways and bulging urban areas may partially explain this inverse exodus, California’s increased tax rates1 are surely a major factor in some residents’ decisions to leave the temperate coastal climes for a new life in the desert.

Current California Tax Laws

Personal Income Tax

State taxes in California are known for being among the highest in the United States. As of 2018 California has ten (10) personal income tax rates ranging from 0% to 13.3%. Under current law, the highest rate of 13.3% begins at incomes of $1,000,000. The lowest rate is reserved for earners of less than $8,223 in annual taxable income.

Federal Deductions

To add insult to injury, under current law, many federal deductions are now limited or disallowed in California. Moreover, California does not have reciprocity agreements with other states to allow non-residents to work there without paying income tax, except to their home state.

Capital Gains Tax

A word on capital gains: Sadly, California state tax law does not include a special provision for capital gains tax. So unlike with U.S. tax law, you won’t receive a preferential rate for long-term gains on assets you hold onto for more than a year. This means that if you fall into that 13.3% bracket, you'll also pay that same rate of tax on your capital gains.

This article will answer some of the more commonly-asked California state income tax questions associated with changing residency from California to Nevada.

How can a state tax me in the first place?

In general, the several states possess the constitutional power to tax all income of individuals who are residents, regardless of the source of that income, when persons avail themselves of the privileges and protections of the laws of that state.2

And of course, California has taken full advantage of those constitutional rights, taxing the entire income of its state residents.3

What makes me a “resident” of California?

California defines a “resident” to include (1) every individual who is in California for other than a temporary or transitory purpose, and (2) every individual who is domiciled in California who is outside the state for a temporary or transitory purpose.4

Under California law, a person who stays in the state for other than a temporary or transitory purpose is a legal resident, subject to California taxation.  Brief vacations or transactions in California—such as signing a contract or giving a speech—constitute temporary or transitory purposes that do not confer residency.

However, nearly every other kind of visit can confer such a status, including going to California for health reasons, extended stays, retirement, or employment that requires a long or indefinite period. The California Franchise Tax Board (“FTB”) even collects state income taxes from non-resident athletes and performers who earn any amount of money while in California.5

It seems clear that when former Californians completely relocate themselves—along with their families, spouses, children and all property—to Nevada and never return, then California has no further claim on them as residents.

But What If

But what happens when someone doesn’t sell his residence in the former state and returns to it from time to time for vacations or other reasons?  Perhaps an executive takes a new full-time job in Las Vegas, but his children continue to attend school and live with their other parent in San Diego?  Or an owner of a business retires from day-to-day operations, moves to Reno, but continues to earn income from interests in her Sacramento-based company?

These questions are made tricky due to several factors:

  • the absence of a bright-line test, the aggressiveness of the FTB
  • the long-term nature of the FTB appeals process
  • and the reality that subjective intent doesn’t count for much.

Unfortunately, only a few judicial decisions exist relating to the general questions of California residency.6

How does California determine whether a visit has a temporary or permanent purpose?

The 1985 case Corbett v. Franchise Tax Board listed 29 different factors that the FTB will use to determine residency.7

Not to be outdone, the California State Board of Equalization in 2003 heard Appeals of Stephen D. Bragg and set forth the “Closest Connection Test” to determine the state with which a person has the closest connection during the taxable year.8

The Bragg Appeal added 19 additional factors to be considered in determining residency, with weight given to particular factors depending on the totality of the circumstances.

The author’s synthesis of the Corbett-Bragg factors, which might be used to evaluate whether the overall presence of an individual in California is temporary or permanent, is as follows:

  1. Physical presence:
    • The number of days spent within the state of California weighed against the number of days spent within other states
    • Where taxpayer receives bills and personal communications
    • Where is the taxpayer’s point of departure and point of return with respect to vacations
    • Where a taxpayer owns a second home in California, and sell’s without repurchasing the primary residence in another state
  2. Familial presence:
    • Where taxpayer’s spouse/children reside
    • Where children are born, married and raise their own families
    • Where children attend school
    • Where the taxpayer’s family receives medical and dental care
  3. Property presence:
    • Location of owned and rented real property, and where real property is owned in multiple states, the respective size/value may be a factor
    • Location of a home upon which taxpayer claims homestead and tax exemptions
    • Location of vacation homes
    • Location of burial plots
    • Location of bank, checking, savings and credit accounts
    • Location of safe deposit boxes
  4. Professional presence:
    • Where taxpayer is employed and/or performs contracted services
    • Where taxpayer is paid or receives substantial income
    • Location of taxpayer’s family business or other business activities
    • Where taxpayer serves as a director, officer or manager of a business
    • Where taxpayer holds professional licenses and/or memberships
    • Where taxpayer receives professional (i.e. legal, accounting, or investment) services
  5. Legal/Civic presence:
    • Where legal documents (i.e. trusts, wills, powers of attorney, and contracts) are prepared and located
    • Where legal documents are to be given effect
    • Where tax returns are prepared and filed
    • Location of taxpayer’s automobile insurance/registration
    • Location of driver’s licenses for both taxpayer and spouse
    • Where taxpayer and spouse are registered to vote
    • Where taxpayer and/or other witnesses may swear—through affidavit—that taxpayer resides
    • Location of membership in social, civic or religious organizations and where donations are made thereto

What other steps can be taken to protect from taxation in the State of California?

A recent legal victory9 coupled with innovative statutory law in the State of Nevada may provide hope that assets located in the State of Nevada are safe from the taxing authority of California.

Even so, you may also want to do the following:

  1. Update estate planning and testamentary documents in Nevada and consider replacing California trustees, attorneys-in-fact, executors, and conservators with fiduciaries in other states;
  2. Establish a Nevada self-settled spendthrift trust pursuant to NRS 166 and transfer your assets thereto;
  3. Transfer your assets to a Nevada limited-liability company, limited partnership or closely held corporation to receive Nevada’s well-regarded charging order protection;
  4. File partial year and final state income tax returns in California at time of exit;
  5. Record a “Declaration of Domicile” affidavit pursuant to NRS 41.191; and
  6. Be aware of credit/debit card transactions, travel records, and other documented evidence which might prove time spent in California versus other states.

While no one “silver bullet” may exist for those seeking to put down the State of California, a move from the Golden to the Silver State, along with organizing one’s affairs in the manner indicated above, should be helpful in overcoming FTB residency challenges and unfair tax collection efforts.

DAVID M. GRANT is an estate planning attorney at the law firm of Grant Morris Dodds, a law firm specializing in trusts, probate and guardianship, with offices located in Las Vegas and Henderson.  Mr. Grant can be reached at (702) 938-2244 or david@gmdlegal.com.  The author gratefully acknowledges the editorial contributions of Mark A. Solomon, Esq., of Solomon Dwiggins & Freer, and Jason Aivaz, Esq. of Grant Morris Dodds.



Since 2012, the top marginal income tax rate payable by California residents has increased to 13.3% for incomes in excess of $1,000,000.


New York ex rel. Cohn v. Graves, 300 U.S. 308, 312 (1937).


Cal. Rev. & Tax Code § 17041.  Credit may be given for taxes paid in other states.  See Cal. Rev. & Tax. Code § 18001 et seq.


See Cal. Rev. & Tax. Code § 17014(a).


Commonly referred to as the “Jock Tax”, this practice began after the FTB sent tax bills to Michael Jordan and the rest of his Chicago Bulls teammates for all income received by the players during the Bulls’ three game visit in California during the 1991 NBA Finals.


See Whittell v. Franchise Tax Board, 231 Cal.App.2d at 284 (1964); and Noble v. Franchise Tax Board 118 Cal.App.4th 560 (2004).


Corbett v. Franchise Tax Board, 213 Cal.Rptr. at 893 (1985).


Appeal of Stephen D. Bragg 2003-SBE-002 (Cal.St.Bd.Eq.) (May 28, 2003).


See Franchise Tax Bd. of California v Hyatt, 538 U.S. 488 and its progeny.  In Hyatt, an individual who had recently moved to Nevada sued the FTB for its invasion of privacy, bad faith, overreaching actions and other personal torts as it went about building its tax case. The result was a Nevada civil verdict against the FTB in the amount of nearly $400 million, which currently remains under appeal.  It is the author’s belief this case should temper the FTB’s aggressiveness in pursuing cases against those disclaiming California residency.

As published in the Nevada Lawyer, the official publication of the State Bar of Nevada, Vol.23, Issue No.1, January  2015.

© 2014-2015 State Bar of Nevada (updated 2019)