Leaving California or New York for London: does state tax follow you?

How do domicile and statutory residence differ?

Domicile is the place you treat as your permanent home and mean to return to. You have one at a time and keep it until you acquire another. Statutory residence is a separate test built on presence in the state or a home kept there. Either can make you a resident, so a move has to answer both.

California's Franchise Tax Board sets out its approach in Publication 1031, its guidelines for determining resident status. A resident is anyone in the state for other than a temporary or transitory purpose, and anyone domiciled there who is outside it for a temporary or transitory purpose. A Californian on a fixed-term London posting who means to go back therefore generally remains a resident. The publication describes a safe harbour for a person domiciled in California who is away under an employment-related contract for an uninterrupted minimum period. It is lost where return visits pass a set annual limit, where intangible income passes a set amount, or where the main purpose of the absence is to avoid tax.

New York's Department of Taxation and Finance treats as a resident anyone domiciled in the state. It also treats as a resident a person domiciled elsewhere who maintains a permanent place of abode in New York for substantially all of the year and spends more than a set number of days there, with any part of a day counting. A New York domiciliary can be treated as a nonresident under two narrow exceptions. One is for people who spend most of a long continuous period in a foreign country while they, their spouse and their minor children keep time in New York within strict limits. New York City applies the same definitions for its own resident tax.

What state return do you file in the year you move?

Usually a part-year resident return. It taxes income from all sources up to the date residence ended, and only income from sources within the state after that. California uses Form 540NR for part-year residents and nonresidents, and New York uses Form IT-203. The date given on that return is the line both you and the state work from.

Neither state simply taxes the resident months and ignores the rest. California works out the tax as if you had been a resident for the whole year and turns it into a rate, which it then applies to the income California can tax. New York also computes the tax as though you were a full-year resident before allocating a share to the state. Your UK salary after the move is not taxed by the state, but it can raise the rate applied to the income that is.

Timing of payment does not always move income out of the resident period. New York's instructions apply an accrual rule on a change of residence, so a bonus awarded before the move is reported as resident income even if it is paid afterwards. The federal Form 1040 still covers the whole calendar year, and both state returns start from the federal figures. Our form guide to US state tax returns explains the return types, and our multi-state tax filing service prepares them with the federal return.

Which ties keep a state's claim alive?

The ties that count are the ones showing where your life is centred. California compares your connections to the state with your connections elsewhere, weighs their strength as well as their number, and says no single factor decides the matter. New York looks at every aspect of a person's life and says that registering to vote elsewhere is not enough alone.

Publication 1031 illustrates the point with overseas moves. A person who takes a contract abroad while a spouse and children stay in the California home remains a resident. So does someone who puts belongings in storage in the state, keeps a California licence, voter registration and bank accounts, and forms only work ties abroad. A family that sells the home, ships its possessions, leases a home overseas, puts the children in school there and has no intention of returning is treated as nonresident from the day of the move.

A home kept in New York needs particular care. A permanent place of abode is a residence suitable for year-round use that you maintain, whether or not you own it, and it usually includes one your spouse owns or leases. Someone who has moved domicile to London but keeps a New York flat for visits can still be a statutory resident if the day count is met.

• Where your spouse or partner and children live
• Where your main home is, and whether a former home is kept ready for use
• Time spent in the state compared with time spent elsewhere
• Driving licence, vehicle registration, voter registration and professional licences
• Where bank accounts are held and where your doctors, accountants and lawyers are
• Social ties such as clubs, places of worship and professional bodies

Is income from the state still taxed after you leave?

Yes. A nonresident is taxed on income with a source in the state. Both California and New York include rent from real property located there, gains on selling that property, pay for work physically performed in the state and income from a business carried on there. A nonresident return reports that income alone.

Pay is sourced where the work is done. California's guidance says the employer's location and the place of payment do not change that. New York adds a rule for remote work: days worked elsewhere by a nonresident whose primary office is in New York can generally count as New York workdays, so anyone in London who stays on a New York payroll should take advice before treating the pay as foreign.

Equity follows the work too. California taxes option income on a source basis even after the holder has left, and New York looks to services performed in the state during the grant period. Our post on RSUs when you move between the US and the UK covers the federal and UK side of an award that vests or is exercised after a move.

Take a US citizen who leaves a job in San Francisco for a permanent role in London, lets her California flat on a long lease and later exercises share options granted while she worked in the state. Her part-year return taxes all her income up to the date of the move. After that her UK salary is outside California's reach. The rent remains California-source, and so does the option income to the extent it relates to work performed there. She files Form 540NR for each later year in which she has a California filing requirement. The rent also goes on Schedule E (opens the official IRS page in a new tab) of her federal return and has to be considered for UK tax.

Do states follow the foreign earned income exclusion and foreign tax credit?

Not reliably. Publication 1031 states that California allows neither a foreign tax credit nor a foreign earned income exclusion. New York's resident credit covers tax paid to another state, the District of Columbia or a Canadian province, so UK tax does not qualify. The position differs from state to state.

On the federal return, a US citizen working in London relieves double taxation with the foreign earned income exclusion (opens the official IRS page in a new tab) on Form 2555 or the foreign tax credit (opens the official IRS page in a new tab) on Form 1116. Publication 54 (opens the official IRS page in a new tab) explains both, and our post on the foreign tax credit or the exclusion in the UK explains why the credit often gives the better result. Neither choice binds a state. A person who remains a California resident while working in London adds any excluded earnings back on the California return and receives no credit for UK tax, so the same salary can bear UK tax and California tax with nothing linking the two.

The treaty does not close the gap either. A tax treaty is an agreement with the federal government, and California's guidance says that income a treaty exempts from federal tax generally remains taxable by California unless the treaty specifically says otherwise. The US-UK treaty (opens the official IRS page in a new tab) should be read on that footing. This is why ending state residence cleanly usually matters more than any federal election.

What records show a change of domicile?

Records made at the time of the move, showing that you gave up the old home, moved, and intend to stay. California requires all three: abandoning the prior domicile, physically moving to and living in the new place, and an intention to remain there permanently or indefinitely, shown by your actions. New York requires clear and convincing evidence, and it is for the taxpayer to produce it.

A declaration carries little weight alone. Publication 1031 gives the example of someone who announces a new state of residence but keeps the California home and spends most of the year in it, and who remains a California resident. What counts is conduct that matches the stated intention. Keep the documents with your tax records, because a residency enquiry asks about facts that are hard to reconstruct years later.

The answer depends on the facts, and a temporary assignment is a different case from a permanent move. We deal with the state position alongside the federal return through our individual tax return preparation service, so the date residence ended is the same on every form. For the wider picture of who files what, return to the guide to US and UK tax returns for Americans in the UK.

• Sale documents or a long lease for the former home
• UK tenancy or purchase documents, council tax bills and school places
• An employment contract showing a permanent or open-ended UK role
• Travel records showing the days spent in the state after the move
• Changes of address on bank, brokerage and voter records
• The part-year return itself, stating the date residence ended