Texas to California: What a Boomerang Move Does to Your Residency Case

The California to Texas move is the most written-about relocation in American tax planning. Less discussed is the traffic in the other direction. According to 2024 Census Bureau data as summarized by USAFacts, 77,200 people moved from California to Texas, making Texas the top destination for people leaving California. In the same year, 45,400 people moved from Texas to California, making Texas the top source of newcomers to California as well.

Some of those 45,400 are Texans moving west for a job. Many are Californians coming home: the remote worker whose company ended remote work, the family that missed the grandparents, the founder who sold and found that Austin was not where they wanted to spend the proceeds. For that group, the return is not a fresh start. It reopens the file California opened when they left.

Two questions follow every boomerang move. The first is whether California accepts that you were ever gone, because a short stay in Texas followed by a return is exactly the pattern the Franchise Tax Board reads as a temporary absence. The second is what California taxes once you are back, because several kinds of income earned or set up in Texas become California income the day you return. The corridor overview, with both states’ rules side by side, is on the moving from Texas to California page.

California defines a resident two ways under Revenue and Taxation Code section 17014: anyone present in the state for other than a temporary or transitory purpose, and anyone domiciled in California who is outside the state for a temporary or transitory purpose. The second prong is the one that matters for a boomerang. If you never gave up your California domicile, the time you spent in Texas was a temporary absence, and California taxed your income from all sources the whole time, including every paycheck earned in Texas.

The burden runs against you. In Appeal of Donovan (2020-OTA-102), a taxpayer whose employer relocated him from California to Florida took a job with a different company about five months later and moved back to California. He subtracted the wages earned in Florida on his California return, and the Franchise Tax Board disallowed the subtraction. The Office of Tax Appeals sustained the assessment, stating that the burden of proof on a change of domicile "is on the party asserting such change," and that if doubt remains, "the domicile must be found to have not changed." His statement that the move was intended to be permanent was, in the panel’s words, "simply an unsupported assertion." During the protest, the Franchise Tax Board had asked for a new bank account, a lease, a voter registration or a Florida driver’s license. He had produced none of them.

The amount at issue in Donovan was $1,311. The principle scales. A Californian who moves to Texas in the spring, sells a company or exercises options in the summer, and moves back the following year is presenting the same fact pattern at a much higher dollar value, and the Franchise Tax Board’s own Publication 1031 gives it the vocabulary to decide the case. Its examples treat an absence as temporary where the spouse and children stay in the California home, where belongings and a car go into storage in California, or where the taxpayer keeps a California driver’s license, voter registration and bank accounts while away. A short Texas stay with the California house kept and the California life left running looks like a trip, not a move.

Time matters too. As our California residency guide sets out, the Franchise Tax Board has four years from the filing date to assess a filed return, and no limit at all for a year in which it believes you were a resident and you filed nothing. The nonresident or part-year return you filed for your Texas year is open for four years, and the return to California lands inside that window. An auditor reviewing your first full year back can pull the Texas-year return with it.

California has one safe harbor, and it is narrower than people think. Under section 17014(d), as Publication 1031 describes it, a California domiciliary who is outside the state under an employment-related contract for an uninterrupted period of at least 546 consecutive days is treated as a nonresident for that period. Return visits that total no more than 45 days in any taxable year covered by the contract are treated as temporary.

The safe harbor does not apply if the individual has intangible income exceeding $200,000 in any taxable year during which the contract is in effect, or if the principal purpose of the absence is to avoid personal income tax. Separate contracts cannot be stacked: Publication 1031’s own example is a worker with two one-year overseas contracts separated by three months back in California, who fails because the absence was not uninterrupted. A Californian who takes a two-year assignment at an employer’s Dallas office, stays the full term and returns can qualify. A Californian who moved to Austin to work remotely for the same California company, or who left to sell a business, generally cannot, and is judged instead on the facts and circumstances of the move.

If you did genuinely move to Texas, your protection is the record of that move, and a boomerang does not erase it. Publication 1031’s description of a completed change of residence is a household that sells its California home, moves its possessions, enrolls its children in school in the new state, gets a new driver’s license and makes social connections there with no intention of returning. Its list of residency factors includes time spent in and out of California, the location of your spouse and children, your principal residence, your driver’s license, vehicle registration, voter registration, professional licenses, bank accounts, the origination point of your financial transactions, your doctors, dentists, accountants and attorneys, your place of worship and clubs, your real property and investments, and the permanence of your work.

For the Texas years, that means the Texas driver’s license, the vehicle registration and the voter registration, the Texas homestead exemption on a Texas home, the Texas doctors and bank, and above all a California home that was sold or leased out at arm’s length rather than held open. It also means a calendar of the California days you spent during the Texas period, because the Franchise Tax Board counts any part of a day in California as a day. Keep those records for at least four years after the last Texas-year return. Deciding to come back later does not make that move fail, but it does make an auditor more likely to look at it.

The outbound side of this analysis, including the closest-connections factors California applies to a departing resident, is on the moving from California to Texas page.

The rule for the return year is simple to state. Publication 1031 says that "part-year residents of California are taxed on all income received while a resident and only on income from California sources while a nonresident." From your residency start date forward, California taxes your worldwide income at rates that, as our California guide summarizes, reach 13.3 percent, with capital gains taxed as ordinary income.

The word that does the work is received. Publication 1100, the Franchise Tax Board’s guide to taxing individuals who change residency, applies the rule to income earned before the move and paid after it. Its example is a worker who left a New York job, moved to California on May 1, and received a final New York paycheck on May 8. California taxes that paycheck, because the worker was a resident when it arrived, with a credit for any tax paid to the other state. Texas has no income tax to credit, so a Texas bonus or final paycheck that lands after you are back is taxed by California with nothing to offset it. The same logic applies to pensions and qualified plan distributions received after the move, even when every dollar was earned outside California.

Part-year residents also pay a higher rate than their California income alone would suggest. Under Publication 1031, nonresidents and part-year residents compute tax by applying an effective tax rate to their California taxable income, and that rate is the California tax on all income, as if you were a resident for the whole year, divided by that income. Income earned in Texas before your return date is not taxed by California, but it does push up the rate applied to everything that is.

Stock compensation is where boomerang moves get expensive, and the rules cut against the returning Californian in both directions.

Going out, California keeps a claim. Publication 1100’s example is an employee who performed all services in California from February 2021 to May 1, 2024, then left the company and moved to Texas, and exercised nonstatutory options on June 1, 2024. California taxes the exercise income as compensation for California services, even though the employee was a Texas resident on the exercise date. Our California guide explains the general method: income from options earned while you were a California resident is apportioned by California workdays during the vesting period, no matter where you live when you exercise.

Coming back, California takes the rest. Publication 1100 states that if you exercise nonstatutory stock options while a California resident, "the resulting compensation is taxable by California because the wage income is recognized while you are a California resident." Its example is options granted while the employee lived in Nevada and exercised one month after moving to California, all of it California income. For incentive stock options, the publication’s example is directly on point for this corridor: options granted to a Texas resident in February 2020 and exercised in February 2023, a move to California in December 2023, and a sale of the stock in March 2024. California taxes the entire gain, "because you were a California resident when you sold the stock."

The practical consequence is that equity vesting or held during the Texas years is untaxed by any state only if it is exercised and sold while you are a Texas resident. Once you are back in California, options and shares from the Texas period become ordinary California income or gain, with no other state’s tax to credit against them. If you are planning a return and hold meaningful equity, the timing of exercise and sale relative to your move date is the single largest number in the decision. Our residency savings and exposure calculator lays out what a given residency start date reaches and what it does not.

Real estate sold or exchanged during the Texas years carries two traps that Publication 1100 illustrates using Texas property.

The first is the installment sale. The publication says that if you sold property located outside California on the installment basis while a nonresident, "your installment proceeds while a California resident are taxable by California." Its example could have been written for this corridor: a Texas rental property sold on installments while the seller was a nonresident, a move to California the following May, and an installment payment received in August. Both the capital gain and the interest in that payment are taxable by California. A Texas house or business sold on a note during the Texas years becomes California income, payment by payment, from the day you return. If the note is meant to run for years, compare the cost of accelerating the gain into the Texas period before you move.

The second is the like-kind exchange. When California property is exchanged under Internal Revenue Code section 1031 for property outside California, Publication 1100 requires an annual information return, Form FTB 3840, and the deferred California gain remains California-source. Its example is a Texas resident who exchanged a California condominium for Texas property, deferring a $15,000 gain, and later sold the Texas property for a $20,000 gain. California taxes the $15,000. A Californian who rolled a California rental into Texas property on the way out has not left that gain behind, and if they sell the Texas property after returning, the whole gain is taxed by California as a resident.

Because gains from stocks and bonds are sourced to your state of residence on the date of sale, as Publication 1031 states, there is an obvious temptation to realize gains in Texas and move back afterward. That is a legitimate result when the Texas residency is real and the return date is the actual date your life moved back. It is a risky one when the return date is chosen to sit after a sale, and the facts show the household was already in California.

Publication 1031 states that you are presumed a California resident for any taxable year in which you spend more than nine months in the state, and its examples make clear the presumption is a floor, not a ceiling: someone who comes to California on an indefinite job assignment becomes a resident "upon entering the state," even while keeping a house and bank account elsewhere for months. If the children start school in California in August, the family has signed a California lease, and the moving truck has been unloaded, a sale in October from a claimed Texas address is the kind of timing an auditor will test. The cleaner sequence is the honest one: decide what you will sell, sell it while you are still living in Texas, and then move.

Leaving Texas costs nothing in income tax, because Texas has none, but it has one trap that becomes a California problem. As our Texas residency guide sets out, keeping a Texas homestead exemption on a property that is no longer your principal residence exposes it to cancellation under Tax Code section 11.43(h), with any of the five preceding years added back to the appraisal roll as escaped property under section 11.43(i). A Texas homestead still on the rolls after you move back is also a document stating that your principal residence is in Texas, which is the kind of contradiction residency auditors in both directions look for. Remove it when you leave.

On the California side, California has no declaration of domicile; residency is established through conduct and intent. Our California guide lists the deadlines: a California driver’s license within 10 days of becoming a resident, vehicle registration within 20 days, and voter registration. It also flags a new-resident trap that catches Texas returners: a vehicle, boat or aircraft bought out of state and brought into California within 12 months of purchase may owe California use tax if an equivalent sales tax was not already paid.

For the year of the move you file Form 540NR as a part-year resident, reporting all income received from the return date forward and only California-source income before it. Pick one return date, make the license, registration, lease or closing, school enrollment and employer address change line up with it, and keep the evidence that ties each one to that date.

If the real goal is staying out of an income-tax state rather than coming home, the alternative many Texans compare is on the moving from Texas to Florida page.

For the Texas years, keep the records that proved the move: the Texas license, vehicle registration, voter registration and homestead filing with their dates, the sale or arm’s-length lease of the California home, Texas bank and medical records, and a calendar of every California day with the card statements and travel records behind it. Keep them for at least four years after your last Texas-year return, because that return is still open when you come back.

For the return, keep the grant, vesting, exercise and sale records for every equity award, with the dates and the state you lived in on each one. Keep the installment note and the payment schedule for any Texas property sold on terms, and the FTB 3840 history for any exchange out of California property. Keep the documents that fix your California start date: the lease or closing statement, the school enrollment, the California license and the date your employer changed your address.

The full set of California rules, including the closest-connections test the Franchise Tax Board applies in both directions, is in our California residency intelligence guide, and the Texas side is in our Texas residency intelligence guide.

ResidencyIQ organizes records and highlights potential exposure factors. It does not provide legal or tax advice, and a return to California with equity, a business sale or real estate on either side of the move deserves review by a tax professional who handles California residency cases.

The 2024 figures of 77,200 people moving from California to Texas and 45,400 moving from Texas to California, with Texas ranked first both as the destination for people leaving California and as the source of newcomers to California, are U.S. Census Bureau data as summarized by USAFacts: https://usafacts.org/answers/what-states-are-people-moving-to-and-from/state/california/.

Appeal of Donovan, 2020-OTA-102 (Cal. Office of Tax Appeals, issued February 13, 2020), including the five-month Florida relocation, the $1,311 assessment, the statements that the burden of proof on a change of domicile "is on the party asserting such change" and that if doubt remains "the domicile must be found to have not changed," and the characterization of the taxpayer’s claim as "simply an unsupported assertion," is at https://ota.ca.gov/wp-content/uploads/sites/54/2020/07/19034531_Donovan_Opinion_072020SDwm.pdf.

The two-part definition of resident under R&TC section 17014, the 546-day employment contract safe harbor with its 45-day return visit allowance, $200,000 intangible income exception, tax-avoidance exception and no-stacking example, the temporary-absence and completed-move examples, the residency factors list, the nine-month presumption, the indefinite job assignment example, the statement that "part-year residents of California are taxed on all income received while a resident and only on income from California sources while a nonresident," the effective tax rate method, and the sourcing of stock and bond gains to the state of residence at the time of sale, are from FTB Publication 1031, Guidelines for Determining Resident Status (2025): https://www.ftb.ca.gov/forms/2025/2025-1031-publication.pdf.

The final paycheck example, the nonstatutory stock option examples for a resident who moved to Texas and for a Nevada resident who moved to California, the statement that nonstatutory option compensation exercised while a resident "is taxable by California because the wage income is recognized while you are a California resident," the Texas incentive stock option example and its holding that the gain is taxable "because you were a California resident when you sold the stock," the installment sale rule quoted as "your installment proceeds while a California resident are taxable by California" with its Texas rental property example, and the like-kind exchange rules including Form FTB 3840 and the Texas condominium example, are from FTB Publication 1100, Taxation of Nonresidents and Individuals Who Change Residency (2025): https://www.ftb.ca.gov/forms/2025/2025-1100-publication.pdf.

California’s four-year assessment period and unlimited period for unfiled years under R&TC section 19057(a), the any-part-of-a-day counting practice, the 13.3 percent top rate and ordinary-income treatment of capital gains, the workday apportionment of stock options earned while a resident, the absence of a declaration of domicile, the 10-day driver’s license and 20-day vehicle registration deadlines (https://www.dmv.ca.gov/portal/driver-education-and-safety/special-interest-driver-guides/new-to-california/), the 12-month use tax trap, and Form 540NR part-year filing, are from our California residency guide, which cites the underlying sources including https://www.ftb.ca.gov/tax-pros/procedures/residency-and-sourcing-technical-manual-disclosure.pdf and https://reedcorp.tax/helpful-guides/california/california-stock-option-allocation/.

Texas’s absence of an individual income tax, the homestead exemption cancellation under Tax Code section 11.43(h) and the five-year escaped-property lookback under section 11.43(i), are from our Texas residency guide, which cites the underlying sources including https://comptroller.texas.gov/taxes/property-tax/exemptions/.