Break California residency to go to Japan?

[rankingranqueen]

Hi,

I'm leaving soon for a job in Tokyo for a few years. It'll be a direct hire in Japan as opposed to being hired in the U.S. and then transferred over, so all my income will be in yen and foreign-earned.

A few people have suggested that I should break California residency for tax purposes. It's not easy to do, and I'd really prefer to keep my driver's license and bank account, but if the state taxes on my foreign income will be ridiculously high, I guess I'll do it.

Does anyone know if this is really a good idea or approximately how much I'd wind up paying on my foreign earned income?

Thanks!

 

[DoctorP]

how much are you going to be earning? I'm not sure about California's laws, but federal tax is excluded on all income under $80,000! I wouldn't think that Cali could hit you very hard if the Gov't gives you a free ride!

 

[Shibuyaexpat]

As an Expat, i don't know if I fall under the same guidelines, but generally, an American citizen gets royally screwed by coming here--tax wise. If you're making over 80K/year, expect to pay at least 12K in taxes.

 

[Buntaro]

You are considered a California resident until you change residency to another state - which will not happen if you move to Japan. However, when you file your federal return, you can deduct up to $80,000, I think. (I think the foreign income deduction form is form 2555.) Hopefully, you can then use the amount of adjusted gross income from your federal return (amount = zero) and put that amount (zero) on the line for adjusted gross income on your state return. That should work, so you do not have to pay California taxes while in Japan.

DO NOT stop filing federal AND state returns while you are in Japan. I did not, for over ten years, and then I came back to the states. I had to go back and file all of those past returns, and pay all penalities. It was a nightmare.