California Exit Tax: What You Need to Know

The California exit tax, also known as the California exit tax, is a tax imposed on individuals who have lived in California for at least 50% of the time during the taxable year. The tax is designed to prevent individuals from avoiding taxes by moving out of the state. In this article, we will discuss the California exit tax in detail, including who is subject to the tax, how it is calculated, and what exemptions may be available.

Who is Subject to the California Exit Tax?

The California exit tax applies to individuals who have lived in California for at least 50% of the time during the taxable year. This means that if you have lived in California for more than half of the year, you will be subject to the tax. The tax is imposed on the gain from the sale of a principal residence, which is defined as the primary residence of the taxpayer.

How is the California Exit Tax Calculated?

The California exit tax is calculated by determining the gain from the sale of the principal residence. The gain is calculated by subtracting the basis of the property from the sale price. The basis of the property is the original purchase price, plus any improvements made to the property. The gain is then subject to the California exit tax, which is 3.33% of the gain.

Exemptions from the California Exit Tax

There are several exemptions from the California exit tax, including:

• Primary residence exemption: If you have lived in California for at least two of the five years preceding the sale of the property, you may be exempt from the tax.

• Disability exemption: If you have a disability, you may be exempt from the tax.

• Death exemption: If you die, your estate may be exempt from the tax.

How to Avoid the California Exit Tax

There are several ways to avoid the California exit tax, including:

• Living in California for less than 50% of the year.

• Selling your principal residence before moving out of California.

• Qualifying for an exemption.

Conclusion

The California exit tax is a complex tax that can have significant implications for individuals who have lived in California for at least 50% of the year. By understanding who is subject to the tax, how it is calculated, and what exemptions may be available, you can take steps to avoid the tax or minimize its impact.