State Taxes After Moving Abroad: Are You Still Liable?
Many U.S. expatriates assume that once they move abroad, their state tax obligations end. Unfortunately, that’s not always the case. While federal tax rules apply universally to all U.S. citizens regardless of residence, individual states have their own rules on when and how a person ceases to be a tax resident. For many expats, this can come as a surprise long after they’ve left the country.
Understanding State Tax Residency
Each state has its own criteria for determining tax residency, and some are more aggressive than others. States like California, New York, Virginia, and New Mexico are known for their strict definitions and enforcement. Generally, you may still be considered a tax resident if you:
- Maintain a home or apartment in the state
- Have a driver’s license or voter registration in the state
- Use a state address for banking, credit cards, or mail
- Return to the state frequently
- Maintain other financial or social ties
If any of these apply, the state may argue that your ties are strong enough to justify ongoing tax residency—even if you’re physically living abroad.
Consequences of Not Severing Ties
Failing to formally end your residency status can lead to unexpected tax bills, penalties, and interest. Some states will pursue back taxes years after a person has moved away if they believe the individual never properly ended their tax residency.
It’s also possible for expats to be subjected to double taxation if their new country of residence also taxes their income. Without careful planning and documentation, this can result in significant financial strain.
Steps to Break State Residency
If you’re planning to move abroad—or already have—it’s essential to take concrete steps to sever ties with your former state:
- Sell or rent out your home: Ownership of property is a major tie.
- Update your mailing address: Use a non-state address, preferably international.
- Surrender your driver’s license: Apply for a license in your new country if possible.
- Deregister to vote: Remove yourself from state voter rolls.
- Inform the state: File a final part-year resident return, notifying them of your change in status.
Get Professional Help
State tax laws can be nuanced and vary widely. It’s easy to make mistakes that could cost thousands in back taxes or legal fees. If you’re unsure of your status or need help filing correctly, it’s smart to consult a professional.
Diane Siriani and the team at Expatriate Tax Returns specialize in helping U.S. expats navigate these state tax complexities. With experience across all 50 states and international jurisdictions, they can help you determine your residency status, file the correct forms, and ensure you remain in full compliance.
