Tax Strategies for Mid-Year Move

[ranchingretirement]

Hello fellow Mustachians!

My family and I moved from Southern California to North Texas in July and I’m looking to crowd source any useful tax strategies for mid-year moves from one state to another. Also, does anyone have experience with a mid-year change in insurance due to a move? Sounds like I’ll have to meet my annual deductible again (birth of a new child) in Texas and the payments towards our plan in CA are essentially wasted, but if anyone has other guidance, would appreciate your thoughts!

Financial Details:
NW: $1M
Income: $250k
Age: 35
Family: 1 child (newborn), married

[MDM]

Cut all ties to CA ASAP so the CA FTB has no valid reason to claim you continue to be a CA resident.

E.g., get TX drivers' licenses, move bank accounts to TX, register to vote in TX, etc.

[ranchingretirement]

I’ve done all that - we got our TX drivers licenses in August and registered to vote here as well. Anything else I could be doing at this point to minimize overall taxes for tax year 2023? Maxed out all 401(k), HSA, etc., but curious to know if there’s anything I’ve overlooked as part of the mid-year move.

[MDM]

Seems you are doing all you can, and doing it well. 

An Overview of California Tax Residency has more details on that, and Investment Order and Tax-efficient fund placement - Bogleheads cover general tax-efficient investing.

If you don't see anything new in the links above - keep up the good work!

[ranchingretirement]

Thanks for the helpful links! I think I’ve landed on one potential strategy - accelerating contributions to my Donor Advised Fund to increase the deduction available to me in 2023, thereby lowering taxes owed when I’m still subject to CA state income tax. I’ll have a lower overall tax rate in 2024 and going forward, so I think it makes sense to stack my annual charitable contributions for 2023, 2024, and 2025 into the end of this year.

Thoughts?

[MDM]

Thanks for the helpful links! I think I’ve landed on one potential strategy - accelerating contributions to my Donor Advised Fund to increase the deduction available to me in 2023, thereby lowering taxes owed when I’m still subject to CA state income tax. I’ll have a lower overall tax rate in 2024 and going forward, so I think it makes sense to stack my annual charitable contributions for 2023, 2024, and 2025 into the end of this year.

Thoughts?

If that allows you to do itemized deductions for the IRS and/or CA then it should work.  It won't affect the Adjusted Gross Income that many states use (without allowing itemized deductions) as a starting point for state tax, but California's tax code is complex enough that it may include itemized deductions.

[SeattleCPA]

Cut all ties to CA ASAP so the CA FTB has no valid reason to claim you continue to be a CA resident.

E.g., get TX drivers' licenses, move bank accounts to TX, register to vote in TX, etc.

+1