Texas, Nevada, Florida, Washington, Tennessee—for high-earning Californians, the appeal is obvious. No state income tax means keeping more of what you earn. With California's top rate at 13.3%, the savings on a seven-figure income can be substantial.
But here's what you need to understand: FTB knows the math too. And for them, auditing your move to a no-tax state is a better use of resources than auditing someone who moved to New York or Illinois.
Why No-Tax States Mean Higher FTB Scrutiny
When FTB successfully challenges a residency change, California assesses tax on your worldwide income. If you moved to another state with an income tax, California must give you credit for the taxes you legitimately paid to that state. This is the Other State Tax Credit under Revenue and Taxation Code Section 18001.
But when you move to a state with no income tax, there's nothing to credit. FTB collects 100% of the California tax with no offset.
The math from FTB's perspective: If you have $2 million in income and moved to New York, a successful residency audit might yield California tax minus OSTC for the New York tax you paid—perhaps a net of 3-4% on your New York-source income. If you moved to Texas with the same income, a successful audit yields the full 13.3% (or higher) on everything. Same audit resources, dramatically different revenue potential.
This isn't speculation about FTB's motives. It's rational resource allocation. Audits take time and staff. FTB will direct those resources where the expected return is highest. No-tax state moves are at the top of that list.
The Major Destinations
Five states receive the bulk of California's high-income departures to no-tax jurisdictions. Each has distinct characteristics that affect both the appeal of the move and the audit dynamics.
Texas
Texas is the top destination for Californians overall, with roughly 94,000 people making the move annually in recent years. The state has no income tax, a lower cost of living in most areas compared to coastal California, and major economic hubs in Austin, Dallas, Houston, and San Antonio. The distance from California—typically a three-hour flight—can work in your favor during residency disputes. It's harder for FTB to argue you're maintaining a California-centered life when your new home is 1,500 miles away.
Nevada
Nevada attracts over 30,000 California households annually, with Reno and Las Vegas as the primary destinations. The proximity to California is both the appeal and the risk. A move to Reno puts you 30 minutes from the California border and under four hours from the Bay Area. FTB knows that proximity makes it easier to maintain California connections—continuing to see California doctors, spending weekends at a California vacation home, keeping children in California schools.
If you're moving to Nevada, the documentation burden is higher precisely because the move is so easy to make. FTB will scrutinize whether your Nevada presence is genuine or whether California remains the center of your life.
Florida
Florida has no state income tax and offers the advantage of true geographic separation from California. A cross-country move makes it more difficult to maintain the daily California connections that FTB looks for in residency audits. The time zone difference alone changes your relationship to California—business hours barely overlap, and casual trips back become serious travel commitments.
Florida also has strong asset protection laws, which appeals to some high-net-worth individuals beyond just the tax savings.
Washington
Washington draws California's tech workers in particular, with Seattle's industry presence making it a natural destination. There's no state income tax on wages, but there's an important caveat: Washington enacted a 7% capital gains tax on gains exceeding $278,000 annually (the inflation-adjusted threshold for 2025). The tax was upheld by the Washington Supreme Court as an excise tax rather than an income tax.
For W-2 employees, Washington remains a no-tax state. For founders, executives with significant equity compensation, or anyone with substantial investment income, the capital gains tax changes the calculus. You're not moving to a true no-tax environment—you're trading California's comprehensive income tax for Washington's targeted tax on investment gains.
Tennessee
Tennessee eliminated its Hall Tax on investment income in 2021, becoming a true no-income-tax state. Nashville's growth has made it an increasingly popular destination, particularly for those in music, entertainment, and healthcare industries. Like Texas and Florida, the distance from California works in favor of establishing a clean break.
What FTB Looks For
Regardless of which no-tax state you choose, FTB's residency analysis follows the same framework. They're looking at where you maintain the strongest connections across multiple factors: where you spend the most time, where your family lives, where your business interests are centered, where you're registered to vote, where your vehicles are registered, where you maintain professional licenses, where you receive medical care, and where you have social and community ties.
The legal standard is domicile—your one true home, the place you intend to return to when you're away. Physical presence matters, but it's not dispositive. FTB has successfully challenged taxpayers who spent more days in their new state than in California by showing that California remained their domicile based on the totality of circumstances.
The tax motivation problem: When you move from California to a no-tax state, tax savings are the obvious explanation. FTB doesn't have to prove tax motivation to win a residency case, but they will note it. The burden is on you to demonstrate that your move was genuine and complete, not a paper relocation while your real life remains in California. The cleaner your break, the stronger your position.
Making the Move Stick
If you're serious about changing your residency to a no-tax state, approach it with the assumption that FTB will audit. Document your departure thoroughly. Establish genuine connections in your new state—not just a driver's license and voter registration, but real participation in the community. If you're keeping California property, have a clear and defensible reason. Be prepared to demonstrate where you actually spend your time with records that can withstand scrutiny.
Most importantly, understand that the move has to be real. A no-tax state address doesn't help you if your life is still centered in California. FTB has access to credit card records, cell phone data, travel records, and other evidence that reveals where you actually are. The goal isn't to create a paper trail—it's to actually move your life.
The Bottom Line
Moving to a no-tax state can provide substantial tax savings. It can also put you at the top of FTB's audit priority list. The combination of obvious tax motivation and high revenue potential makes these moves attractive targets for California's residency enforcement team.
None of this means you shouldn't make the move. It means you should make it carefully, with full awareness of the scrutiny you're likely to face, and with documentation and life changes that can withstand that scrutiny. The taxpayers who run into trouble are those who treat the move as a tax strategy rather than an actual relocation.