Many American citizens living outside the United States believe they are free from US state tax once they move abroad. While that is often true, some states may continue to treat you as a tax resident even after departure.
Here is what every US expat needs to know about state tax.
Do Expats Still Owe State Taxes?
It depends on the state. While the federal government taxes all US citizens on worldwide income, state tax rules vary.
Some states make it difficult to break residency, especially if you maintain certain ties. Others, like Florida or Texas, have no income tax at all.
States That Commonly Tax Expats
The following states are known for aggressively taxing former residents unless clear steps are taken to sever ties
These states look at factors such as:
Even temporary returns to visit family can raise questions.
How to Break State Residency
To end state tax obligations, take formal steps such as:
Each state has its own rules. Simply moving abroad is not always enough.
Do You Need to File a State Return?
If you earned income from that state or are considered a resident, yes. Some expats must still file a final state return or even continue filing yearly if residency was not properly broken.
Final Thoughts
State tax is often overlooked by US expats, but failure to sever ties properly can lead to unexpected taxes, audits, or penalties.
At Nordfiscus, we help expats federal and state obligations. Contact us today to review your situation and avoid surprises.
Request a personalized quote today. Tax return filing including FBAR starting at $649 CAD.
Consultation at $149 CAD.