California Exit Tax
Leaving California DMV
How much is the California exit tax?
The amount of the California exit tax is 0.4% of an individuals’ net worth over $30,000,000 in a tax year, no matter where it’s located—within CA, other states within the US, or overseas. This amount is halved to $15,000,000 if a married taxpayer files a separate return to their spouse. The one caveat is that there is no California exit tax on real estate (but if the real estate is within state lines, it would still be taxed under California Revenue and Tax Code § 17591).
Why was the California exit tax of 2020 created?
The exit tax is intended to recoup some of the money that California has invested in these businesses and individuals. For example, if a business owner has received tax breaks or other financial incentives from the state, the exit tax ensures that they will still contribute some money to California's economy even after they leave. The primary reason for the enactment of the exit tax was to close a loophole that allowed people to avoid paying taxes on their capital gains.Under federal law, capital gains are only taxed when they are realized. This means that if someone buys a stock for $1,000 and it goes up to$10,000, they don't have to pay taxes on that $9,000 until they sell the stock.If that person livedin California and then moved to another state before selling the stock, they would never have topay taxes on that $9,000 in capital gains.
Who has to pay California exit tax?
The exit tax applies to both businesses and individuals who leave California. This includes businesses that move their operations out of state as well as individuals who relocate to another state. It should be noted that the exit tax only applies if you're moving to another state, not within California.
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Will you be taxed when you leave California?
For more information about California's DMV system. Please visit the California DMV Website here: https://www.sambrotman.com/blog/california-exit-tax#:~:text=How%20much%20is%20the%20C%20alifornia,within%20the%20US%2C%20or%20overseas