Before you start

An SSN or ITIN
Form W-4 with your employer for federal withholding
California Form DE 4 with your employer for state withholding
Records of equity grants, vesting dates and sale proceeds
Records of foreign income and foreign financial accounts

Step-by-step

1
Complete the federal W-4 and California DE 4 on day one
California's withholding certificate is separate from the federal one and using the federal allowances for both is a common source of under-withholding. Fill in the DE 4 properly.
Via employerWho: YouFirst week of employment
2
Determine your US tax residency
The substantial presence test counts weighted days across three years to decide whether the US taxes your worldwide income or only US-source income. Your visa category does not decide this.
OnlineWho: You
3
Determine your CALIFORNIA residency separately
California applies its own residency analysis — a facts-and-circumstances test centred on where you are domiciled and where your closest connections are — and it is administered rigorously. Someone can be a California resident for state purposes on a pattern that would not make them a resident elsewhere. If you split time between states or countries, get this right early rather than at audit.
OnlineWho: You
4
Check for an applicable tax treaty, and check whether California honours it
The US has treaties with around 70 countries. California does not automatically conform to federal treaty provisions — a position exempt from federal tax under a treaty can still be taxable by California. This is a genuine trap for newcomers who model the federal answer and assume the state follows.
OnlineWho: You
5
Model the tax on your equity before the first vest
Restricted stock is taxed as ordinary income at vesting, and California taxes it too. Employer withholding at the flat supplemental rate frequently falls short of what a high earner actually owes once state tax is included. Work out the real number and make estimated payments if there is a gap.
OnlineWho: YouBefore the first vest
6
Remember California taxes capital gains as ordinary income
There is no preferential state rate for long-term capital gains — they are taxed at your full marginal California rate. For someone selling vested stock this changes the arithmetic of holding versus selling, and it is not how most other countries or several other states work.
OnlineWho: You
7
If you buy, understand Proposition 13 and check for Mello-Roos
Your taxable value is what you paid, rising about 2% a year until you sell — so budget from the purchase price, not from the neighbour's bill. Then check whether the parcel sits in a Mello-Roos community facilities district, which adds a separate special tax that is disclosed at sale and easily overlooked.
OnlineWho: You
8
File federal and California returns by 15 April
The tax year is the calendar year. California's filing deadline normally aligns with the federal one, and the state has extended it in disaster years — check rather than assuming either way.
OnlineWho: YouBy 15 April annually
9
File an FBAR if foreign accounts exceed $10,000
Aggregate foreign account balances over $10,000 at any point in the year trigger a FinCEN filing, separate from your tax return and with its own penalties.
OnlineWho: You

Documents you’ll need

Form W-2 from each employer, issued by 31 January
Form 1099s for freelance, interest and investment income, and 1099-B for stock sales
Forms W-4 and DE 4 filed with your employer
Equity plan statements showing grant, vest and sale details
Passport and travel history for the substantial presence day count
Foreign account statements for FBAR reporting

Things most newcomers don’t know

The SDI wage ceiling was removed in 2024, and high earners felt it.

State Disability Insurance used to stop at a wage cap. Since 2024 it applies to every dollar of wages, which functions as an additional percentage point-ish on top of an already high marginal rate for people earning well above the old cap. It is deducted quietly on the payslip and it is a real part of the Bay Area tax picture that salary comparisons routinely miss.

Source: California Employment Development Department

California does not automatically follow federal tax treaties.

A newcomer whose income is exempt from federal tax under a treaty with their home country can still owe California tax on it, because the state does not conform to those provisions. This surprises people every year, and it is the single most valuable thing to check with a professional in your first California filing season.

Source: California Franchise Tax Board

Proposition 13 means your neighbour's tax bill tells you nothing about yours.

Taxable value is set at purchase price and capped at roughly 2% annual growth until the property sells. A family who bought in 1995 may pay a fifth of what the identical house next door costs its 2026 buyer. This distorts everything downstream: it discourages long-term owners from moving, keeps some rental stock cheap, and means a buyer must budget from the sale price rather than the neighbourhood's average bill.

Source: California State Board of Equalization

Capital gains get no state discount here.

California taxes long-term capital gains at ordinary income rates, so a high earner selling stock faces a combined federal and state rate well above what the federal long-term rate alone implies. For a workforce paid substantially in equity this is a first-order planning fact, and it is different from how most other countries treat the same gain.

Source: California Franchise Tax Board

Common mistakes to avoid

Assuming payroll withholding on vesting stock covers the combined federal and California liability.
Assuming a federal treaty exemption also applies to California. It frequently does not.
Filling in the federal W-4 and ignoring the separate California DE 4.
Budgeting property tax from a neighbour's bill rather than from your purchase price.
Buying in a Mello-Roos district without pricing the special tax.
Missing the FBAR because a home-country account did not feel 'foreign'.

Some of this may be out of date. Spotted something inaccurate? Help us keep it right for the next newcomer.