I have a question about safe harbor rules for California residency, the intangible income limit.

Question

I moved to Europe with my family last year. I have an open-ended contract as an employee and my husband doesn't work. California safe harbor rules say that there is a $200,000 intangible income limit to qualify. Is this limit per person (since both me and my husband can claim safe harbor) or for both of us?

James L. Arrasmith · Answer

Under California law, the safe harbor rule for determining residency and the $200,000 intangible income limit applies per taxpayer, not per couple. This means that if you and your husband qualify for the safe harbor rule individually, you can each have up to $200,000 in intangible income and still be considered non-residents for tax purposes. 
 
Here are the key points to keep in mind: 
 
1. Each spouse must meet all the safe harbor requirements independently to qualify for non-resident status. 
 
2. The $200,000 intangible income limit applies to each individual taxpayer, not to the couple jointly. 
 
3. Intangible income includes interest, dividends, capital gains, and income from other sources such as partnerships, S corporations, and trusts. 
 
4. If either you or your husband exceed the $200,000 intangible income limit individually, that person may be considered a California resident for tax purposes, even if the other spouse qualifies for the safe harbor. 
 
It's important to note that the safe harbor rule is just one factor in determining California residency for tax purposes. Other factors, such as the amount of time spent in California and the maintenance of ties to the state, can also impact your residency status. It's recommended to consult with a tax professional to evaluate your specific situation and ensure compliance with California tax laws.

Q: I have a question about safe harbor rules for California residency, the intangible income limit.