Tesla (NASDAQ:TSLA | TSLA Price Prediction) stock has been one of the most successful stocks over the past decade. Some people have become millionaires just by investing in Tesla stock. However, if investors want to sell their Tesla shares, they’ll end up with significant capital gains taxes.
A Redditor faces this dilemma and posted about it in the Fat FIRE subreddit. The individual has $10 million in unrealized capital gains and lives in California. The Golden State has some of the highest tax rates in the country, especially on capital gains.
The Redditor is considering moving out of California and going to a state with no income tax before cashing out on the position. However, the Redditor is also wondering if California can still go after the money. I’ll comb through the comments and share my thoughts, but it is always good to speak with a financial advisor if you can.
It’s Possible to Avoid California Taxes
Other Redditors took to the comments to share their stories about moving out of California to avoid capital gains taxes on investments they accrued while living in the state.
If you move out of the state and establish a residence in another, you can avoid high capital gains tax rates. However, you have to ensure mail arrives at your new residence instead of your California property. It’s even better if you can sell your California home and remove all ties to the state, but some people keep their California home as a rental.
Remove Ties from the State
California Franchise Tax Board (FTB) conducts thorough investigations to ensure people are truly moving instead of fake moving. Having all mail delivered to your new residence is a good starting point, but you should also work with professionals in the area.
For instance, you may want to have your primary accountant, lawyer, doctor, and dentist all located in the new state. If you still go to California to speak with your primary accountant or schedule a dental appointment, the FTB may tax you.
One Redditor suggested that it is better to sell the California home to avoid any complexities. If you keep the home, it’s better to turn the real estate into a long-term rental instead of a vacation home to demonstrate that it is truly an investment property.
If you still want to keep your home, you should wait until at least a year after your move before selling Tesla stock. Furthermore, you may also benefit from putting your house in a child’s name or an LLC instead of your own.
Work with a Tax Attorney
While Redditors took to the comments with thoughts to consider, it’s best to work with a tax attorney who knows how to navigate tax laws. You can receive a professional’s advice and discover the best way to avoid paying capital gain at California’s tax rates.
The Redditor has $10 million in unrealized capital gains. With that amount of money on the line, it’s absolutely worth speaking with a professional. The right tax attorney can save you much more than you’d have to pay them.
You don’t want to feel overwhelmed about online advice, make the move, and realize that you still have to pay California taxes on your capital gains. A professional tax attorney can help you out.
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