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Old 10-27-2008, 10:14 PM
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Performance Bonus and CA State Income Tax

I have recently been transferred to California from Texas by my company. In connection with my job, I have received a performance bonus that was earned whilst I was employed in Texas State.

I have received my performance bonus from Texas and now I am concerned about the implication of California Taxes on my Performance Bonus!

Would California State tax my performance bonus earned from Texas. As such, Texas does not tax me on my personal income tax and there would not be any tax credit to offset the California Tax on the Bonus!

This sounds kinda unfair if California Taxes me on my Texas sourced income when I have just moved there!

Last edited by TaxGuru : 10-31-2008 at 11:22 AM.

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Old 10-31-2008, 11:23 AM
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This is an interesting question because had you earned the bonus say in New Jersey, then the tax treatment would be as follows;

"California would tax all the income earned from New Jersey and then provide a tax credit on California Form S Line 12. In theory, this would not result in any double taxation of income as the tax credit would generally offset the California tax liability generated from the New Jersey sourced income."

However, Texas has no personal income tax and hence there would not be any Texas Personal Income Tax credit to offset against the California taxing the Texas Bonus. I suspect, you may escape the tax on the performance bonus earned whilst you were a Full Time Texas Resident as this income is sourced fully to Texas. But, the scenario changes when you are a full time California Resident and had earned income from Texas, in this situation perhaps California would tax you on the Texas sourced income!

I personally have never encountered this problem, perhaps some other CPA has had a similar experience could share their experience to our Tax Forum members.

I would contact the California Franchise Tax Board at the following telephone number shown below and confirm my position.

California Tax Board: Tel: 800.852.5711

Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.

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