Establishing Domicile When Your Family Leaves California

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

Establishing domicile in a new state takes three things at once: you give up your old home, you physically move and live in the new state, and your actions show you intend to stay there indefinitely. California’s Franchise Tax Board spells out exactly those three tests, and it judges them by your actions, not by a form you file or a count of days. For a family earning $750,000 to $3,000,000, the yearly difference in state tax can run from tens of thousands of dollars to well over $100,000 (see the worked example below), and getting it wrong can mean California still taxes everything you earn.

Domicile and residency are two different tests in California

Most families use “domicile” and “residency” as if they mean the same thing. California treats them as separate concepts. FTB Publication 1031 defines domicile as the place where you voluntarily establish yourself and your family with “a present intention of making it your true, fixed, permanent home.” You can have only one domicile at a time, and you keep it until you acquire a new one.

Residency is broader. You are a California resident if either of these is true:

• You are in California for other than a temporary or transitory purpose.
• You are domiciled in California but outside the state for a temporary or transitory purpose.

That second line is the trap. A Bay Area family that rents a house in Seattle for a year, keeps the Palo Alto home, and plans to come back is still domiciled in California, and California can tax all of its income, wherever it was earned.

Why the move matters so much at this income level

California residents are taxed on income from all sources. Nonresidents are taxed only on California-source income, and part-year residents are taxed on everything earned while resident plus California-source income after the move (Pub 1031, Section I).

The rates are what make this a large decision. California’s top rate is 13.3% (12.3% plus the 1% Behavioral Health Services Tax on taxable income over $1,000,000, per the 2025 FTB rate schedules), California has no lower rate for capital gains, and State Disability Insurance takes 1.3% of all wages with no cap for 2026 (EDD).

Washington has no individual income tax in 2026 (WA DOR). That comes with three caveats a high earner should know before moving:

• A new 9.9% tax on individuals and joint filers with AGI over $1,000,000 takes effect January 1, 2028 (SB 6346). DOR guidance on how it will be calculated is still pending.
• Washington taxes long-term capital gains at 7%, rising to 9.9% on taxable gains above $1,000,000, after a standard deduction that was $278,000 for 2025 (WA DOR capital gains tax). Real estate and retirement accounts are exempt.
• Washington has its own estate tax, with an exclusion of $3,000,000 for deaths from July 1 to December 31, 2026 (WA DOR estate tax tables), far below the $15,000,000 per-person federal exclusion for 2026.

Worked example: a $1.2M household moving from San Mateo to Bellevue

Assumptions: married filing jointly, two children ages 4 and 7, $1,200,000 of W-2 pay and vested RSUs, and, to keep the arithmetic simple, California taxable income of $1,200,000 (deductions ignored). California has not published 2026 brackets, so this uses the 2025 schedule as an estimate.

The California figure is before small exemption credits, so treat it as a ballpark. The Washington column leaves out the state’s Paid Family and Medical Leave premium, which for 2026 is 1.13% of wages, shared between employer and employee, and stops at the $184,500 Social Security wage cap, so it adds at most about $2,085 in total per job (Washington Paid Leave employer toolkit). Employees with an approved WA Cares exemption do not pay that premium. The gap is roughly $120,000 a year. If the family moves on July 1, 2026, California still taxes the wages earned in the first half of the year, and the gap for 2026 is closer to half that. From 2028, the household’s AGI over $1,000,000 would also face Washington’s new 9.9% tax, which narrows the gap at this income level.

Equity compensation can follow you out of the state. FTB Publication 1100 gives an example of an employee granted nonqualified stock options while working in California who moves to Texas and exercises later: the income is still taxable by California because it was compensation for services performed there (Pub 1100, Section E). Families with large unvested RSU grants should expect part of each future vest to stay California-source and should have their CPA confirm how the employer allocates it.

The three legal tests and the evidence the FTB looks at

Pub 1031 says a change of domicile requires all of the following: abandoning your prior domicile, physically moving to and residing in the new locality, and intending to remain there permanently or indefinitely “as demonstrated by your actions.” To decide residency, the FTB compares the strength of your ties, not just the number. Its listed factors include:

• Time spent in California versus outside it.
• Where your spouse and children live.
• Where your principal residence is.
• Which state issued your driver’s license and registers your cars.
• Where you hold professional licenses and are registered to vote.
• Where your banks are and where your financial transactions originate.
• Where your doctors, dentists, accountants and attorneys are.
• Where your social ties are: place of worship, professional associations, clubs.
• Where your real property and investments are, and how permanent your work assignment is.

For families with young children, two factors carry the most weight in practice: where the kids are in school and where the marital home is. Pub 1031 states that maintaining a marital abode in California is a significant factor in establishing California domicile.

A move checklist for the year you leave California

1. Pick a move date and write it down. Part-year residency turns on the date your California residency ended. Lease or closing documents, school enrollment and moving invoices all support it.
2. Decide what happens to the California house. Keeping it as a family home you return to undercuts the abandonment test. If you keep it, renting it to an unrelated tenant tells a clearer story than leaving it ready for your return.
3. Move the family, not just the earner. If one spouse takes a job elsewhere while the other spouse and the children stay in the California home, the FTB’s own example (Pub 1031, Example 4 under “Leaving California”) treats that as a temporary absence.
4. Switch the paper trail within weeks. New driver’s licenses, car registration, voter registration, and professional licenses where they apply.
5. Move your advisers and providers. Pediatrician, dentist, CPA and estate attorney in the new state are all factors on the FTB list.
6. Update payroll and the equity plan. Confirm your employer has your new work location so state withholding and the sourcing of future RSU vests are recorded correctly.
7. Review your estate documents. A will or trust drafted under California law should be reviewed by a Washington attorney, especially because of Washington’s $3,000,000 estate tax exclusion in late 2026. Both states are community property states, so the character of your assets usually carries over, but guardian nominations and trustee choices may need updating.
8. File the right return. The move year is a Form 540NR year for California (part-year resident). Keep a log of days spent in California after the move.

For families with large unrealized gains, timing a sale relative to the move also matters, since California taxes gains realized while you are a resident and Washington taxes gains realized while you live there. Our guide to brokerage account taxes covers when a gain is actually realized.

Common mistakes that keep families taxed as California residents

• Relying on a 183-day rule. California does not use one. The rule in Pub 1031 runs the other way: you are presumed to be a resident in any year you spend more than nine months in California, but spending fewer days there does not make you a nonresident if your closest connections are still in California.
• Declaring a new state while living the old life. Example 3 under “Leaving California” in Pub 1031 describes a person who declared Nevada residency and moved bank accounts, but kept the California home, spent six to seven months a year there, and kept California clubs. The FTB still treated that person as a California resident.
• Assuming a work assignment abroad or in another state ends residency. California has a safe harbor for an employment-related contract outside the state for at least 546 consecutive days, but it does not apply if you have more than $200,000 of intangible income (interest, dividends, gains) in any year of the contract. Many families in our reader group have investment income above that line.
• Forgetting the spouse’s income. When spouses file separately, community property rules divide wages based on the domicile of the earning spouse (Pub 1031, Section M), which can pull half of one spouse’s pay back into California.

What to write down for your children

A move across state lines is one of the largest money decisions a family makes, and it is usually made for reasons that have nothing to do with taxes: a job, schools, grandparents, space. Record those reasons in a short Decision Memo: why you moved, what you gave up, what the numbers looked like, and what you would do differently. Your children will face the same question about where to build a life, and the reasoning will be more useful to them than the tax savings. Conversations fade. Documentation compounds.

Frequently asked questions

How long does it take to establish domicile in Washington?

There is no waiting period for income tax purposes. Domicile changes when all three tests are met: you have abandoned California as home, you physically live in Washington, and your actions show you intend to stay. If those facts line up on the day you move, your California residency can end that day. Separate rules, such as in-state college tuition, have their own waiting periods.

Can we keep our California house and still be Washington residents?

Yes, but it weakens your position. Owning California real property is one factor, not a disqualifier. The FTB looks at whether the house still functions as your family home. Renting it to an unrelated tenant, moving furniture and the children, and spending little time there makes it clear your principal residence is now in Washington.

Does California tax RSUs that vest after we move?

Possibly part of them. California taxes nonresidents on compensation for services performed in California, and Pub 1100 applies this to stock options exercised after a move. Equity that was earned partly while you worked in California can remain partly California-source. Your CPA and your employer’s payroll records will determine the split.

A good next step is to list your family’s ties to each state using the FTB factors above and see which ones still point to California. If you want help putting numbers on a move, our tax management team runs this as part of the Tax & Wealth Assessment, together with estate planning and a review of your equity and employee benefits. Documenting the decision for the next generation fits within our family governance work.

This article is general education, not tax or legal advice, and the right move depends on the family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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