Residency and taxes?

Question

We just moved to california but my husband and I are maintaining our washington state residency. Hes military and we won't be here forever. We plan on moving back to washington state after he retires.

Our budget is tight and it would be a good idea for me to take on a part time job to suppliment income but I'm wondering if this would hurt us in the long run? I heard that the tax codes here are weird and strict. I don't want to hurt our income and I don't want to change to a california residency status. Can anypone help?

Answer 1

If you take on a job here in California, you will become a California resident. You will have to file a separate California state tax return. A part time job is not likely to generate much state tax liability.  There should be numerous return prepares in your vicinity that are familiar with your situation.

Answer 2

Since he's active duty military, he automatically maintains his WA State residency unless he takes positive actions to change his domicile.  I'm not sure if CA extends that to dependent though; you are not protected by Federal law as he is.  His domicile is protected by the Soldier & Sailors Civil Relief Act but that act only extends to military personnel on extended active duty.

Some states do allow dependents to maintain the same Home of Record (domicile) that the active duty member does while others consider you a legal resident of the State where you live.  The Legal Office on base can tell you what CA law is on that.

Answer 3

California is not very kind in this regard.  He will be exempt if he wishes to maintain his Washington domicile.  You however will be required to file a California return.  They get a little weird when it comes to credits and the such because they are based only on your income not the combined income.  Make sure that the person that is doing your tax return is familiar with military issues and spousal income.

Answer 4

Typically, income taxes are owed to the jurisdiction in which you work.  If your home state has an income tax, the tax you pay to the jurisdiction in which you work is a credit against the tax you owe to your home state.  This way, you don't pay tax twice on the same income.