Remote Work Tax Guide for San Francisco Employees: Can California Still Tax You?

Thousands of tech workers left San Francisco during the remote work revolution, moving to states like Texas, Nevada, and Washington to escape California\'s 13.3% top tax rate. But California\'s Franchise Tax Board is aggressively pursuing former residents, and the rules around remote work taxation are more complex than most people realize.

California\'s Sourcing Rules for Remote Workers

California generally taxes income based on where the work is physically performed. If you moved to Austin but still work for a San Francisco company, your income should be sourced to Texas (where you perform the work), not California. However, California may challenge this if you maintain ties to the state or return frequently.

The Residency Audit Threat

California\'s FTB conducts aggressive residency audits on high-income individuals who claim to have left the state. They examine your driver\'s license, voter registration, where your family lives, where your doctors and dentists are, bank account locations, and even cell phone records. A failed audit means owing California taxes plus penalties and interest.

Stock Options and RSUs After Leaving California

California claims the right to tax stock options and RSUs based on the proportion of time you worked in California during the vesting period. If you received a 4-year RSU grant and worked 3 years in San Francisco before moving to Texas, California can tax 75% of the RSU income when it vests — even if you are a Texas resident at vesting.

Safe Harbor: Establishing Non-Residency

To safely escape California taxation, you must establish genuine residency in your new state. This means: spending fewer than 183 days in California, obtaining a new state driver\'s license, registering to vote in your new state, moving your bank accounts, updating your estate planning documents, and filing a non-resident California return.

The 60-Day Rule for Temporary Returns

If you return to California for more than 60 days in a tax year, the FTB may argue you are still a resident. Plan your visits carefully, especially around year-end. Keep detailed records of every day spent in California, including the purpose of each visit.