California Employment Law
Have California Employment Law Questions? Ask a Lawyer.
Hello and thank you for your question today.
Are you online with me?
Taxes are based on income. If you were to make more income, you would pay more overall in taxes. When you pay taxes, you pay taxes to the federal government, as well as state and local taxes. As to how much more, and who you would owe would depend on the job you get in California. If you work as a W2, then you would owe California Income Tax. If you were however set up a company and be paid as an independent contractor, then even if the money was paid out of California, you would only have to pay taxes in Massachusetts if that was where your business was incorporated. The tax requirement in this situation would depend on the legal structure of your business. For example, if your business is a Limited Liability Company (LLC), the LLC gets taxed separately from the owners, while sole proprietors report their personal and business income taxes using the same form. You would file in both MA and in CA, but where you file will largely determine what you were paid and how. You would want to do your state tax returns in California first, then in MA second (assuming you live in MA - you would want to to the tax return for the state you live last) The reason behind this is that you would want to have taxes from the nonresident state flow to the resident state to maximize credits or deductions for taxes already pain in other states.
You are required to pay taxes on income you made while living in a state, as well as income earned from sources within that state. So, depending on where your primary place of residence is would make a big difference in how taxes are calculated.
So, for example, lets say you make $10,000 from working in California. You would have to report that income to California and pay $1,000 in taxes. Since you are a MA resident, MA would also tax the $10,000, but they would give you a $1,000 tax credit for the tax you already paid in California
The alternate would be true if you moved to California
If you lived in both places during part of the year, then you would not only pay tax on income earned from work performed in the state, but also pay tax on all other income received while residing in the state. If you only lived in one state while working online for the other, then you would only pay tax on income earned from work performed in the state, and on income received from other sources within the state.
Depending on where you lived, and what the working arrangement was, would determine exactly how your apportionment schedule was used.
Depending on which state you use as your home state, and which city you move to, how much you are paid and how you are paid, will depend on how much more you pay, if at all. In California, there is a tax rate range. In MA there is a flate rate of federal adjusted gross income. If your nonresident state has higher taxes than your resident state, then you will end up paying more in total taxes because your resident state won't allow you a full credit.
Additionally, if you have enough deductions to significantly reduce your taxes for your resident state, but don't have any of those for your non-resident state, you may have to pay higher taxes overall. This is because you may not have enough resident state taxes to use the full credit from the nonresident state.
So, as you can see, there are a lot of considerations in this situation. I could talk for hours about all of the possibilities. However, without more specific questions or facts, I don't know if that would necessarily benefit you. The simple solution is to use a program like turbo tax who will do all of this stuff for you, or, depending on how much you make, get a CPA to get you the best return.
If all of the above fully answers your question, I would be most grateful if you would remember to provide my service a positive rating, as this is the only way I will receive credit for assisting you. However, if you have any additional questions or concerns regarding anything above, please do not hesitate to ask as I will be more than happy to assist you further.
and have a wonderful rest of your day.
Thank you - that is quite a lengthy response. And of course, I see you have included a lot of details, but now let's see if we can simply it for Dummy 101 :)
1) out of all the options, which would be the best thing for me to do:
a. work full time in MA, reside MA, take part time contracts in CA
b. work part time in MA, reside MA, take full time contracts in CA
c. work part time in MA, reside MA, take part time contracts in CA
d. work part time in CA, reside in CA, take part time contracts in MA
e. work full time in CA, reside in CA, take part time contracts in MA
basically if you were to order the list above in terms of maximizing my tax rate, which would it be?
assume the full-time (120K) and part-time (50K) compensation is the same regardless of where the contract is happening.
The below answers are in order of lowest amount paid in taxes given the information you have provided:You will pay the lowest amount of taxes by working part time both places, as your total compensation will only be 100k. And, if you were only making 100k, then the option that would pay the lowest taxes is:c. work part time in MA, reside MA, take part time contracts in CAthen:d. work part time in CA, reside in CA, take part time contracts in MAHowever, as I am sure you would prefer to be making 170k, and because while you will be paying more taxes, you will also be making more income, the way to pay the lowest taxes and receive the highest income would be:a. work full time in MA, reside MA, take part time contracts in CAthen:e. work full time in CA, reside in CA, take part time contracts in MAthen:b. work part time in MA, reside MA, take full time contracts in CAHope that helps!
Thank you! That makes it really easy for me to understand what to do... basically what actions to take in order to make the most money (after taxes).
Also, what about the real estate tax? Would buying a property in MA or CA change the equation? Or does that not have any impact?
Assume a home of 400K in value.
Thanks so much!
You would be able to take the same deduction either way, however, the amount you would pay in property tax would actually depend on the county in which the property is located in. So, what county you buy the property in, in MA or CA would determine how much you pay, but as the rates change from county to county, it is impossible for me to give you an accurate response as to which state would be better given that regard. That being said, certain counties are much more preferable to live in than others, though of course, you may end up with a much larger home for the same money with less property tax in Riverside than in if you were to buy in Boston. Where you would rather live, however, should be something to consider.
Wow, you are so thorough.
I guess the right question - or the actionable item for where to buy a house in either states is :
What are the top 4 counties in CA SF bay area to live in regarding lowest property tax?
And what are the top 4 counties in MA Boston area to live in regarding lowest property tax?
thanks so much - basically i am considering a relocation to CA from MA, but wondering whether to keep my PT job in MA (if it's even worth it) and I want to buy a house (establish a primary residence) and if so, where that should be?
If I worked PT in MA and full time in CA, could I still register a MA home as my primary address or residence?
thanks so much! i am loving this service!
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).