Introduction
Many people want to take advantage of Nevada’s 0% income tax while still working in high-paying California jobs. But can you live in Nevada and avoid California state taxes? The answer depends on your residency status, where your income is earned, and how well you’ve severed ties with California.
California’s Residency-Based Tax Rules
Applicable Code: California Revenue & Taxation Code §17014
California taxes all residents on worldwide income, and nonresidents on California-sourced income. If you’re a resident, you must file Form 540. If you’re a nonresident, but earn California income, you must file Form 540NR.
You cannot simply claim to live in Nevada while working in California and expect to avoid California taxes—it must be done legally and correctly.
The Appeal of Nevada Residency
Nevada has:
- 0% state income tax
- No franchise tax
- No tax on capital gains or retirement income
- Favorable climate for trusts and asset protection
Because of this, many individuals, especially entrepreneurs and retirees, consider relocating to Nevada to reduce their tax burden.
What Triggers California Tax Residency?
You’re considered a California resident if:
- Your primary home is in California
- Your family lives in California
- You spend more than 9 months per year in the state
- You have bank accounts, doctors, cars, voter registration, or licenses in California
- Your income is earned from working or operating a business in California
Even if your home is in Nevada, if your job is physically performed in California, the income is still taxable by California.
FTB’s “Facts and Circumstances” Test
The Franchise Tax Board (FTB) considers the total picture, including:
- Days spent in CA vs. Nevada
- Location of your primary residence
- Where your spouse and children live
- Where your business operates
- State of vehicle registration and driver’s license
- Address used on tax returns and financial documents
There is no single test—FTB audits are based on behavior and documentation.
Legal Ways to Establish Nevada Residency
- Purchase or lease a primary residence in Nevada
- Register your vehicle and get a Nevada driver’s license
- Cancel California voter registration and register in Nevada
- Move your financial accounts, doctors, and records
- Avoid spending significant time in California
- If working remotely, ensure your employer accepts Nevada work location
- Avoid California nexus for your business (e.g., CA-based clients, employees)
Step-by-Step Guide to Shift Residency Legally
Step 1: Establish a physical home in Nevada
Step 2: Update your driver’s license, car registration, and voter info
Step 3: Close or rent out your California residence
Step 4: Move family, pets, and possessions to Nevada
Step 5: Notify the IRS and FTB of your change of address
Step 6: File a part-year CA return (Form 540NR) in your exit year
Step 7: Maintain records showing your Nevada domicile
Conclusion
You can live in Nevada and reduce your California tax burden—if you fully change your residency and stop earning income in California. FTB audits are aggressive, and simply claiming a Nevada address without actual relocation will not hold up in court.
Call to Action
Thinking about leaving California to reduce your tax exposure?
Schedule a consultation with Anshul Goyal, CPA EA FCA, a U.S.-licensed Certified Public Accountant and IRS Enrolled Agent who specializes in California residency planning, multi-state tax filings, and IRS compliance.
📅 Book your appointment here
FAQs – California vs. Nevada Residency for Tax
Q1: Can I work in California and live in Nevada to avoid taxes?
If your work is performed in California, that income is still taxable by California—even if you live in Nevada.
Q2: What proof do I need to show I live in Nevada?
Proof includes a residence, driver’s license, days spent outside CA, and relocation of family and key life functions.
Q3: If I work remotely for a California company, is my income taxable?
If you’re physically working from Nevada, your income is not CA-sourced—but documentation is critical.
Q4: What form do I use when moving out of California?
Use Form 540NR to file a part-year resident return in your exit year.
Q5: How long do I need to live in Nevada to be considered a resident?
There’s no set time. It depends on your intent and actions to permanently sever ties with California.
About Our CPA
Anshul Goyal, CPA EA FCA is a Certified Public Accountant in the U.S., IRS Enrolled Agent, and Fellow Chartered Accountant. With more than 15 years of experience, Anshul has helped clients across the U.S. and internationally with residency planning, tax relocation strategy, and multi-state compliance, saving millions in tax liabilities.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Residency rules are complex and subject to interpretation. Always consult a licensed CPA or attorney before making decisions about relocating or severing California tax residency.