California Exit Tax: What It Is and What Happens When You Move

California doesn’t currently have an exit tax

This means, the state does not charge a tax or fee because you move out of the state, within the US or abroad. What’s commonly called the “California exit tax” actually refers to two different issues: proposals to tax the wealth of certain high-net-worth residents, and the California taxes that can continue to apply after someone moves away.

As of August 2026, Proposition 40, which is a proposed one-time tax of up to 5% on certain taxpayers and trusts with more than $1 billion in covered assets, is on California’s November 3, 2026 ballot. It is not currently law.

For most people leaving California, the more immediate issue is residency and California-source income:

There is no tax just for leaving California. Moving to another state or country does not itself trigger a special departure tax.
Your residency status matters. California taxes part-year residents on their worldwide income while they are residents of the state.
California taxes can continue after you move. Nonresidents may still owe California tax on California-source income, including income from California property, businesses, or services performed in the state.

In other words: leaving California can change how the state taxes you, but it does not necessarily end your California tax obligations.

If you’re moving abroad, our guide to California state taxes for expats explains the broader residency and state-tax rules that can continue to affect you after you leave.

Leaving California and Unsure About Taxes?

Greenback helps you understand what happens to your tax obligations when you move abroad and how to avoid ongoing California tax exposure.

California Exit Tax Status in 2026

The biggest development in 2026 is Proposition 40, the Billionaire Tax Act, which has qualified for California’s November 3, 2026 ballot.

If approved, Proposition 40 would impose a one-time tax of up to 5% on certain taxpayers and trusts with more than $1 billion in covered assets. Until voters approve it, however, it remains a proposal.

This is the latest in a series of wealth-tax proposals that have helped fuel the idea of a “California exit tax”:

Proposal	Key provision	Status
AB 2088	Proposed a wealth tax with a declining obligation for certain former residents for up to 10 years	Did not become law
AB 259	Proposed a wealth tax with rules affecting certain former residents for up to four years	Did not become law
Proposition 40	Proposes a one-time tax of up to 5% on certain taxpayers and trusts with more than $1 billion in covered assets	On the November 3, 2026 ballot

Where the “10-Year California Exit Tax” Came From

The idea of a “10-year California exit tax” dates back to Assembly Bill 2088 (AB 2088), a 2020 proposal that sought to create an annual wealth tax on high-net-worth California residents. It outlined a 0.4% tax on worldwide net worth exceeding $30 million, or $15 million for married taxpayers filing separately.

The most debated element was how the tax followed individuals after leaving California. AB 2088 introduced a 10-year formula to calculate the taxable share of wealth. For qualifying former residents, that taxable percentage would phase down annually until reaching zero.

This provision sparked the persistent rumor of a “California 10-year exit tax.” It was never a direct fee for relocating. Instead, it was a formula designed to retain partial tax exposure on wealthy individuals after they established nonresidency. AB 2088 never passed and died in the Legislature in 2020.

A later proposal, AB 259, revived the wealth-tax concept but used a four-year residency formula instead of AB 2088’s 10-year approach. The bill was held in committee in January 2024 and died at the end of that month without becoming law.

This legislative background helps to explain why references to a multi-year California exit tax are still circulating. These claims stem from failed bills rather than active state tax statutes.

The current measure, Proposition 40, is different from both AB 2088 and AB 259 and doesn’t feature a 10-year phaseout framework. It’s a ballot measure which voters will decide on in November this year.

What Happens to Your California Taxes When You Move?

Moving out of California shifts how the state taxes you, but your obligations do not always end the day you leave. State tax liability depends on two factors: your residency status and the source of your income.

California groups taxpayers into three categories:

Residency Status	What California Taxes
Resident	Income from all sources worldwide
Part-Year Resident	Worldwide income earned while living in California, plus California-source income earned after moving
Nonresident	Only income sourced directly to California

According to the California Franchise Tax Board (FTB), California-source income for nonresidents generally includes:

Pay for work or services physically performed in California
Rental income from property located in California
Gains from selling California real estate
Profits from a California-based business, trade, or profession

Other compensation requires closer evaluation. For instance, equity compensation like stock options and restricted stock units (RSUs), as well as certain deferred compensation, remain partially taxable if they vest or pay out based on time worked in California before your move.

Updating your address alone does not clear your tax liability. You need to identify the exact date your residency ended and verify whether any subsequent income has California ties. Part-year residents and nonresidents with continuing California-source income report this by filing California Form 540NR.

Next, we’ll look at how California determines whether you have actually ended your residency and why that can be more complicated than the date you physically moved.

How California Determines Your Residency After You Move

Moving out of California involves more than submitting a change of address or booking a one-way flight. The Franchise Tax Board evaluates the full scope of your life before and after the move to decide if you have legally become a nonresident.

California applies a “closest connections” test. Because no single factor dictates residency, the FTB weighs your ongoing ties in California against the ties you build in your new location.

Key factors the FTB reviews include:

Time spent inside California compared to time spent elsewhere
Location of your primary residence, spouse or partner, and children
Where you hold a driver’s license, maintain voter registration, and register vehicles
Where you keep bank accounts, professional licenses, and active business interests
Location of your routine healthcare providers, accountants, and attorneys
Nature of your employment outside California, specifically whether the role is temporary or permanent
Retention of California real estate, club memberships, or local investment holdings

Your domicile matters as well. California defines domicile as the place you consider your true, fixed, permanent home—the place you intend to return to when you are away. To change your domicile, you generally need to leave your previous domicile, physically establish yourself somewhere new, and demonstrate through your actions that you intend to remain there permanently or indefinitely.

Declaring yourself a resident of another state or country is not necessarily enough if your strongest ties still point back to California. This is one reason taxes after leaving California can become complicated: establishing nonresidency is generally a facts-and-circumstances test rather than a single checklist or number of days.

What Does California Look at When You Move?

The FTB looks at the strength of your connections to California compared with your connections elsewhere. No single factor determines residency on its own. Instead, the FTB considers the full set of facts and circumstances surrounding your move.

Factors can include:

How much time you spend in California versus outside the state
Where your spouse or partner and children live
The location of your primary home
Where your driver’s license and vehicles are registered
Where you are registered to vote
Where you maintain professional licenses
The location of your bank accounts and other financial activity
Where your doctors, accountants, attorneys, and other professional relationships are based
Where you maintain social and professional ties
The location of your real estate and investments
Whether your work outside California is temporary or permanent

The FTB emphasizes that it is the strength of these ties, not simply the number of them, that matters. Keeping one connection to California does not automatically make you a resident, just as changing a few records to a new state or country does not automatically make you a nonresident.

Residency vs. Domicile

Residency and domicile are related, but they aren’t the same thing. Your domicile is generally the place you consider your permanent home and intend to return to, while your residency for California tax purposes depends on the facts and circumstances of where you live and maintain your strongest connections.

That distinction matters when you leave California because changing your address or spending most of the year elsewhere does not necessarily mean you’ve changed your domicile or ended California residency.

Learn more about the differences between domicile vs. residence in California.

For some people who leave California for long-term employment, however, a specific rule can make residency considerably clearer: the 546-day safe harbor.

California’s 546-Day Safe Harbor

California has a special 546-day safe harbor for certain residents who leave the state for long-term employment. If you are domiciled in California but remain outside the state under an employment-related contract for at least 546 consecutive days, you may be treated as a nonresident for California income tax purposes.

The safe harbor does have important restrictions. It generally does not apply if you have more than $200,000 in intangible income during a tax year covered by the employment contract or if the principal purpose of your absence is to avoid California income tax. Return visits to California totaling 45 days or fewer during a covered tax year are considered temporary.

The 45-day rule is not a general residency rule for everyone who moves out of California. It applies specifically to this employment-related safe harbor. If you don’t qualify, your residency is determined using the broader facts-and-circumstances test described above.

Qualifying for the safe harbor also does not eliminate tax on California-source income. A nonresident can still owe California tax on income such as California real estate or services performed in the state.

See our California 546-day safe harbor Q&A for the qualification requirements and common pitfalls.

Moving Abroad From California

Moving from California to another country adds a second layer of tax considerations. You may become a California nonresident while still remaining subject to U.S. federal tax on your worldwide income as a U.S. citizen or resident alien.

For California purposes, the key question is still whether you have ended your California residency. If you become a nonresident, California generally taxes only your California-source income, rather than your worldwide income. That can include income from California real estate, a California business, or services physically performed in the state.

A few issues are especially important for Californians moving abroad:

Foreign wages: Once you are a California nonresident, wages earned for services performed outside California generally are not California-source income.
California property or business income: Rental income, gains from California real estate, and certain business income can remain taxable by California after you move.
Stock options and equity compensation: RSUs, stock options, and other equity compensation may still be partly taxable by California if they relate to services you performed in the state before your move.
Federal expat tax rules: Moving abroad does not end your federal filing obligation. Depending on your circumstances, you may qualify for provisions such as the Foreign Earned Income Exclusion or Foreign Tax Credit.

If you were a California resident for part of the year or continue to receive California-source income after becoming a nonresident, you may also need to file Form 540NR.

For a broader look at how California taxes Americans living overseas, see our guide to California state taxes for expats.

California Exit Tax vs. the U.S. Exit Tax

The so-called California exit tax should not be confused with the U.S. federal exit tax, also known as the expatriation tax.

California doesn’t impose a tax simply because you leave the state. The federal exit tax, however, is a real part of U.S. tax law. It can apply to certain U.S. citizens who give up their citizenship and long-term Green Card holders who end their U.S. residency.

For people subject to the federal rules, the IRS may treat certain worldwide assets as though they were sold immediately before expatriation and tax the resulting unrealized gains. Our guide to how the U.S. exit tax works and who qualifies as a covered expatriate explains the thresholds, exceptions, and tax consequences in more detail.

Expatriating taxpayers may also need to file Form 8854 with the IRS. See who needs to file Form 8854 and what the form requires for the filing rules and deadlines.

Planning a Move Out of California

If you’re preparing to leave California, the goal is not simply to change your mailing address. You want your records and your day-to-day life to clearly support when your California residency ended and where you established your new home.

Before and after your move, consider:

Documenting your move date: Keep records showing when you left California and established a home in your new state or country.
Updating important ties: Change your driver’s license, voter registration, vehicle registration, mailing address, and other records where appropriate.
Reviewing the ties you keep in California: A California home, spouse or family, business interests, frequent visits, or ongoing work in the state can all be relevant to your residency picture.
Tracking your days and work locations: Keep a record of time spent in California, particularly if you return frequently or perform work while visiting.
Identifying California-source income: Rental property, business income, real estate gains, and some compensation can remain taxable by California after you become a nonresident.
Planning major income events carefully: If you expect to sell a business, exercise stock options, receive RSUs, or have another significant income event around the time of your move, the timing and sourcing rules may affect how much California can tax.
Checking your filing requirement: You may need to file Form 540NR for the year you move or in later years if you continue to receive California-source income.

The important point is consistency. No single document proves that you left California, but your records should tell the same story about where you lived, worked, and intended to make your home.

If you’re moving overseas, it’s worth reviewing your California residency position before the move when possible—especially if you have significant assets, equity compensation, a California business, or property in the state.

California Exit Tax FAQs

Did the California exit tax pass?

No. California does not currently have an enacted tax that applies simply because you move out of the state. Earlier wealth-tax proposals such as AB 2088 and AB 259 did not become law. Proposition 40 is on the November 3, 2026 ballot, but it has not been approved by voters and is not current law.

When does the California exit tax go into effect?

There is no enacted California exit tax with an effective date. Proposition 40 will go before voters on November 3, 2026. Until and unless voters approve it, its proposed tax does not take effect.

Does California recognize the Foreign Earned Income Exclusion?

No. California does not recognize the FEIE or the Foreign Housing Exclusion. If California considers you a resident, you will owe state income tax on income you excluded from your federal return using these provisions.

Who would have to pay Proposition 40?

Proposition 40 would apply to certain taxpayers and trusts with more than $1 billion in covered assets. It proposes a one-time tax of up to 5%. Covered assets include things such as businesses, securities, art, collectibles, and intellectual property, while real property and certain pension and retirement assets are excluded.

Does California have an exit tax on real estate?

No. California does not impose a special real estate tax because you leave the state. However, California real estate remains California-source property after you move, so rental income or gains from selling California property can still be taxable by California when you are a nonresident.

Does California tax you for 10 years after you leave?

No. There is no current California rule that automatically taxes former residents for 10 years after they move. The “10-year California exit tax” idea comes from AB 2088, an earlier wealth-tax proposal that never became law.
California can, however, continue to tax California-source income after you become a nonresident.

Is the California exit tax legal?

California does not currently have an enacted exit tax, so there is no existing California exit-tax law to challenge. Proposed wealth-tax measures have raised constitutional and legal questions, but those debates concern specific proposals rather than a tax that California currently imposes.

Is California’s exit tax the same as the federal expatriation tax?

No. The federal expatriation tax applies in certain circumstances when a U.S. citizen gives up citizenship or a long-term resident ends U.S. residency for federal tax purposes. Simply moving out of California, or even moving from California to another country, does not trigger the federal expatriation tax.

What states have an exit tax?

“Exit tax” is not a standard category of state tax charged whenever someone moves away. States may continue to tax income sourced within the state after a resident leaves, and some wealth-tax proposals have been described as “exit taxes” because of provisions affecting former residents. The rules depend on the state and the type of income involved.
In California, the important distinction is that moving itself is not taxed, but California-source income can remain taxable after you become a nonresident.

Avoid Costly California Tax Mistakes

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This article is for informational purposes only and should not be considered tax or legal advice. California tax laws and proposed legislation are subject to change. For information about California residency rules and filing requirements, visit the California Franchise Tax Board (FTB) and the IRS websites. Always consult with a qualified tax professional regarding your specific situation.