Many people are moving from LA to Las Vegas for retirement these days. I often hear the question, "Once I move, will I be done with California taxes?"

To put it simply, that's half right and half wrong. California state taxes stop not on the day the moving truck leaves, but from the day the state recognizes your change of residence.

First, the good news. Nevada does not impose a personal income tax, so there will be no state income tax on pensions or IRA withdrawals received after the move.

So when does California let go? The key term here is domicile, meaning your primary place of living.

The California Franchise Tax Board (FTB) does not make its determination based on just one date. They look at your driver's license, vehicle registration, where your home is, bank accounts, and where you actually reside to see which state you are closer to.

Therefore, in the first year after moving, you will typically file as a part-year resident. The form is Form 540NR.

In this case, you report all income for the period you were a resident, and only income earned in California after the move. Essentially, your income is divided into two parts based on the moving date.

There is a particularly favorable rule for retirees. Federal law (4 U.S.C. 114) prohibits states from taxing retirement income for non-residents.

The FTB guidance clearly states this point. Pensions, IRA withdrawals, Roth conversions, SEP, and Keogh retirement income received by non-residents are not taxed by California.

For reference, Social Security benefits have never been subject to California state income tax. So, the changes primarily affect personal pensions, 401(k)s, and IRAs.

However, there is a catch. The determining factor is not when the money was earned, but when it was received.

In actual tax tribunal (OTA) cases, IRA withdrawals received while a California resident were considered California income, regardless of where the money was spent. This was true even if it was used as a down payment on a Nevada home.

So if you plan to withdraw a large amount, it's best to wait until after you've moved and established residency in Nevada. I would mark the date on the 1099-R on my calendar.

Another common misconception is the 9-month rule. There is a provision stating that if you stay in California for more than 9 months in a year, you are presumed to be a resident.

The problem is that the reverse does not hold true. Just because you stayed less than 9 months does not automatically make you a non-resident.

In fact, there have been cases where individuals who stayed only 8 months were still deemed residents due to other strong connections. Simply counting days is not enough to ensure your status.

If you leave a house in LA, you need to be particularly cautious. Even if you rent it out, having a home you can return to may be seen as a connection to California.

The rental income from that house will still be considered California income after the move. The principle is that real estate is taxed in the state where the property is located.

When you later sell that house, you will also have to report it to California. If a non-resident sells California real estate, they are generally subject to a withholding of 3 1/3% of the sale price.

However, if it was your primary residence under IRC Section 121, you can apply for withholding exemption using Form 593. While escrow will handle this, it's good to know in advance for peace of mind.

So what should you do on the Nevada side? The Nevada DMV advises new residents to transfer their driver's license and vehicle registration within 30 days.

You also need to switch your car insurance to a company licensed to operate in Nevada. Each of these documents will serve as proof of your change of residence later on.

I recommend the following order: first change your license and vehicle registration, then update your voter registration address.

Change your bank and pension mailing address to Nevada, and establish new local connections like a primary care physician and a church. Keep receipts and contracts that prove your moving date in a separate file.

The FTB is known to scrutinize residency changes more closely if significant income coincides with the moving period. If an audit occurs, having documentation will alleviate concerns.

Honestly, I feel California can be a bit strict in this regard. However, since the rules are clear, if you prepare well, you can avoid unfair situations.

To summarize, if you receive pensions and IRAs after becoming a Nevada resident, you will avoid California taxes, while income from real estate left in LA will still be subject to California tax.

Since individual circumstances can greatly affect your situation, be sure to consult a tax professional before moving, especially if you have significant withdrawals or a home sale in the same year.

Retirement under the desert sun sounds exciting just thinking about it. If you sort out the tax issues neatly before you go, that excitement will last much longer.