State Tax for Expats

Expatriate Tax  
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Ralph Sayers, CPA

State Tax for Expats

All US States have different tax laws for Expats.  If you lived in a no tax state such as Nevada, Washington, Texas or Florida no return is required. In some states if you are out of the country for more than six months, no return is required. Some states such as California, Virginia, South Carolina and New Mexico determine if  you continue to have a tax domicile in the state and if so require you to file tax returns (for all years of your absence) even though you have been gone for years. They consider your intent to return to the state after your stay abroad, and other criteria to determine if you never planned on giving up your tax domicile. For example: Did you maintain a state drivers license; state voter registration; bank account ; real property; license plates for your auto; and if you children attend school in the state.

If your home state has tax domicile laws and you want to be sure to avoid tax problems with your home state such as taxes, interest and penalties due for the period of abscence, you should not move directly back to that state when you return permanently to the U.S. Additionally, plan ahead by giving up all state drivers licenses, bank accounts, real property, voter registration when you abroad.  Some states such as California, Virginia, New Mexico, South Carolina do impose very tough laws. 

Be sure to learn about  the tax law in your state of residency before you leave to live abroad and avoid having to file state tax returns and know with a high degree of confidence that your state taxes will not be assessed while you are away or when you come back.

You do have to continue to  pay taxes in a state if you receive rental income there or receive income from a trade or business located there, even if you are no longer a resident.  Investment income such as from stock sales, dividends, and interest are not subject to state tax unless you live there.  Pensions are no longer taxable in the state in which you earned the pension if  you permanently leave that state.