I live in Nevada but I am based in California. Everyone I talk to says I only have to pay state taxes in Nevada which is none. But I read something recently that said you have to pay state taxes in any state that you spend either 50% of your time or make 50% of your money in as well. Most of my flights depart or arrive in a California City. Anyone have any Enlightenment on this situation? I don't want to be deer-in-the-headlights during an audit.

 

I believe this is well researched. CA will tell you you have to pay CA taxes. As far as I know, you do not. UA is often stuck in the middle, but they will usually do it right.

I think there are old threads here about exactly this. Do a search.

 

A few airline employees have in previous years received a letter from the California Franchise Tax Board claiming they owed tax. If you are a California resident (which you could be if you actually live in California, have an apartment there, etc) or if you do more than 50% of your flying within the state, you could owe tax. In your situation being CA based doesn’t mean your actual flight time is within California borders, which means you owe them NOTHING. Here is the link to their own website saying so, it’s on page 9 of the pdf. I put the relevant wording below:
https://www.ftb.ca.gov/forms/2017/17_1031.pdf
Airline Employees
The wages of nonresident flight personnel (e g pilot, copilot, flight attendant) are not taxable by California unless more than 50% of the individual’s scheduled flight time is in California If more than 50% of the scheduled flight time is in California, wages are apportioned to California based on the ratio of time spent in California to the total scheduled flight time. Flight personnel who are California residents are taxed on all wages received regardless of where the flight time is spent.

 

If 51% of your actual flying is done within CA airspace legally you are required to pay CA income tax. Defining that is however another issue. Years ago when UAL started the shuttle by United some pilots were forced to pay CA tax who lived in WA and NV. It was however easy for the state to show by the shuttle schedules that the 51% test was met. It’s not about where you depart or arrive it’s based on the percentage of time in CA airspace.

 

These folks are correct, for non-residents it comes down to how much you work in the state. I've heard of people who track it, and bid accordingly late in the year. The folks in question have houses in the bay, but "reside" up at Tahoe on the NV side, so they have to walk a fine line since they may already be on the taxman's radar.

But I also believe it's highly unlikely that it would ever be audited out of the blue, since as a non-resident you're innocent until proven guilty, so somebody at the franchise board would have to do a lot of math and pull a lot of ATC records to even maybe make a case.

If you're worried, TRANSCONs fix that problem real quick.

 

I have spoken to a few different tax attorneys over the years. Also read a book on it. Seems that your state of residence is often "a state of mind."

When I left my former state for Texas, I got a bill 23 years later for truck registration. The truck was totaled in an accident something like 19 years ago. Anyway, I sent them a letter stating I was in Texas, moved there at xyz date and proof that the truck was totaled. No problems.

Some states that are "fishing for dollars" due to their high debts, low cash reserves, or fleeing tax base are desperate for money. It is wise to insure all cords are cut if you don't want state X to think they can tax you, when in fact your state of residence is state Y.

If State Y is more tax favorable, get a voter registration card, local library card, concealed handgun permit, drivers license, etc.

They are pretty tight on having two drivers licenses. Don't even try it. I used to have two, one in Louisiana, and one in Texas. A State trooper told me to shread the LA license. Way too much legal headache. I kept it so I could hunt back in Louisiana on the cheap. Bottom line: Not worth it, just pay the out-of-state fees.

If you wanted to be a resident of a particular state, you can do it. Just do all the things needed to establish residency, regardless of pilot base. Likely Ohio is still sending out those silly tax letters to my former home in Louisiana, but thankfully Cleveland is no longer taxing the hell out of me too. Crazy paying Louisiana, Ohio, and Cleveland taxes.....

 

I would argue that California doesn't own the airspace, and that it is controlled by the Federal Authorities. The California Aviation Administration doesn't surpass (userp) the Federal Aviation Administration right?

 

You can argue all you want. The issue was long ago decided in the courts. It’s written into the tax code.

Although not discussed in the case, Tucker will also have to consider the state income tax consequences of where his income originates. Federal law provides that certain interstate transportation and commerce employees, such as pilots, are subject to tax in their state of residence and any state in which they earn more than 50 percent of their pay for being a pilot. This is determined by looking to whether the pilot’s flight time in any non-residence state exceeds 50 percent of the total flight time worked by the pilot while employed during the calendar year. The pilot may be entitled to a tax credit in his residence state for taxes on his pay that is paid to other states.

 

I’m SFO based and fly with quite a few guys who commute down from the Reno area. The discussion comes up frequently and none of them pay any CA state tax. Aside from some... socio/cultural leanings, that ~10% pay bump is the primary reason they live there.

My experience on the 737 is that we leave CA on day one and generally don’t touch it again until the last leg, Hawaii flying being the exception. Anything bigger would be similar, but I don’t know about Bus schedules.

I’m assuming the OP is a United pilot, since it’s posted here.

 

I live in CA and made roughly 200k last year. Subtract my deductions for owning a house and I paid ~$11k in CA state income tax. CA effective tax rate is not as high as you think, especially if you have deductions. Subtract 28% of that as a write-off on my federal taxes (~$3k), and it only really cost me ~$8k in income tax for living in CA.

I get that 8k is still a lot of money, but it is WAY easier than owning two houses (one in CA and one in Reno/Tahoe), commuting between the two cities, risking a massive fine/jail time for evading taxes if you really spend more of your time in CA, etc.... When I talk to other pilots who do this, I have to remind them how much easier/simpler/potentially even cheaper it is to actually just live in CA versus trying to evade.

Personally I think the ~8k that I pay is a small price to pay for the great weather, beaches, things to do, sunshine, and everything else great about living in CA, but YMMV.