Sam Brotman, JD, LLM, MBA December 12, 2020 2 min read

What's the difference between personal income tax residency vs domicile?

If like many Californians, you live in a different state(s) for part of the year, you need to understand the effect multiple residences has on your tax status. A lot of people choose to live in other states part-time to take advantage of lower or nonexistent state income taxes. 

We get this. This strategy can ultimately work for you, but you need to know at the onset, about the potential taxation consequences.

I want to start out by talking about the difference between residency and domicile. Residency is where one chooses to live. Domicile is more permanent and is essentially somebody's home base. Once you move into a home and take steps to establish your domicile in one state, that state becomes your tax home. 

The reality of the situation with residency is even if you go back and forth between two states, your domicile is in one of those states and one of those states has controlling jurisdiction. You cannot have a situation where you have two controlling jurisdictions. 

In a residency analysis, it is important that you stop thinking from a “where do I live?” perspective and start thinking from a tax perspective. This is where a lot of people get into trouble.

The California tax code is called the Revenue Taxation Code (hereinafter, RTC). The tax code in California imposes personal income tax on the entire taxable income of every resident in California. 

Similar to the federal model that taxes an individual’s entire worldwide income, California under RTC §17041(a) will similarly tax a resident of the state of California on all of their "worldwide income." 

In this chapter, I am going to discuss residency and domicile and how the different tax implications. If you have questions, reach out to me. My firm faces this situation with clients often and have experience addressing multi-state tax issues.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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