Part-year resident and nonresident

Part-year resident

If you lived inside or outside of California during the tax year, you may be a part-year resident.

As a part-year resident, you pay tax on:

• All worldwide income received while a California resident
• Income from California sources while you were a nonresident

Nonresident

A nonresident is a person who is not a resident of California.

Generally, nonresidents are:

• Simply passing through
• Here for a brief rest or vacation
• Here for a short period of time to complete:
  • A job
  • A transaction
  • Contract work

Safe harbor

If you’re domiciled in California but are outside of California under an employment-related contract, you may qualify as a nonresident under safe harbor.

Visit FTB Publication 1031 for more information.

Do I need to file?

As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

• Services performed in California
• Rent from real property located in California
• The sale or transfer of real California property
• Income from a California business, trade or profession

Visit the following publications for more information:

• Guidelines for Determining Resident Status (FTB Publication 1031)
• Taxation of Nonresidents and Individuals who Change Residency (FTB Publication 1100)
• Equity-based Compensation Guidelines (FTB Publication 1004)

Leaving California?

Scenario 1:

You relocate to another state and continue to work remotely for a California employer. You periodically travel to and from California in order to perform services for your employer. You receive a W-2 from them. Do you need to file a California return and pay California income tax?

Answer: Yes.

If you are a part-year resident, you pay tax on:

• All worldwide income received while you are a California resident
• Income from California sources while you were a nonresident

During the nonresident portion of the year (or if you are a full-year nonresident), you will have California source income to the extent you physically performed services in California. You will need to file a California Nonresident or Part-Year Resident Income Tax Return California Nonresident or Part-Year Resident Income Tax Return (Form 540NR), to report the California sourced portion of your compensation. One way to calculate the portion of your income that is California sourced is to multiply your total amount of income for the year by a ratio of your total number of days performing services in California over your total number of days performing services worldwide.

CA Workdays / Total Workdays = % Ratio

% Ratio x Total Income = CA Sourced Income

There are special rules for "deferred" or Equity-Based Compensation. Visit FTB Publication 1004 for more information.

Scenario 2:

Similar to Scenario 1, except you perform all of your services outside of California after relocation. Do you need to file a California return and pay California income tax?

Answer: Maybe. Generally, if you are a nonresident and all services were performed outside of California, this would not be California sourced income. However, if you had "deferred" or Equity-Based Compensation, you may still have California sourced income. Visit FTB Publication 1004 for more information.

Scenario 3:

You temporarily relocate to another state for employment purposes, but plan to return, or have returned, to California.

Answer: You may still be considered a resident of California. California residents are taxed on income from all worldwide sources. If you paid tax to another state on this income, you may be entitled to an Other State Tax Credit.

If you’re domiciled in California but are outside of California under an employment-related contract, you may qualify as a nonresident under safe harbor.

Visit FTB Publication 1031 for more information.

Scenario 4:

You are an independent contractor/sole proprietor who relocates to another state. In addition to obtaining customers in your new state, you still perform services for California customers who receive the benefit of your services in California. Will you need to file a California return?

Answer: Yes.

California source income for independent contractors/sole proprietors is determined by looking to where the benefit of the service is received by the customer. The location where the independent contractor/sole proprietor performs the work is not a factor. Visit Market-based sourcing for independent contractors for more information.

Filing requirements

If your income is more than the amount shown in any of the tables below, you need to file a tax return.

Match your filing status, age, and number of dependents with the 2023 tax year tables below.

For previous year tables, visit that year's tax booklet.

Total gross income (worldwide)

* If your 65th birthday is on January 1, 2024, you are considered to be age 65 on December 31, 2023. ↵Return to first table table under the header total gross income (worldwide)

California adjusted gross income

* If your 65th birthday is on January 1, 2024, you are considered to be age 65 on December 31, 2023. ↵Return to first table under the header California adjusted gross income

Dependent filing requirement

If you can be claimed as a dependent on another person's tax return, you have a different standard deduction. It cannot be more than the normal standard deduction. Your standard deduction is the larger of:

• Your earned income plus $400, or
• $1,250 for the taxable year

California method for computing tax

California uses its own method for calculating the tax of part-year residents and nonresidents.

Visit Taxation of Nonresidents and Individuals who Change Residency (FTB Publication 1100) for more information.

What form to file

Nonresidents or part-year residents with a filing requirement must file:

• Nonresidents or Part-Year Residents (540NR)

Visit 540NR Booklet for more information.

Withholding

Withholding is tax previously withheld from your income. Visit Withholding on nonresidents for more information.

Deductions

Deductions are certain expenses which may reduce your taxable income. Visit Deductions for more information.

Other state tax credit (OSTC)

If you paid taxes to both California and another state, you may be entitled to an OSTC. Visit Other state tax credit for more information.

Community property

California is a community property state. If one spouse is a resident of California and the other is a nonresident, then the California:

• Resident may be required to report income earned outside of California.
• Nonresident may be required to report income earned by the resident spouse.

Visit Guidelines for Determining Residency Status (FTB Publication 1031) for more information.