State Tax Returns and American Expats

Americans moving abroad realize that they have to file US expatriate returns and to report their worldwide income if they meet the tax requirements. However, some American expats living overseas might be subject to state tax filing too. Moreover, some states will even put a lien on taxpayer’s US bank accounts and other property if the state tax return is not filed and there is a state tax due. Consequently, it is essential for US taxpayers to learn the state tax filing requirements.

State Tax Return and American Expats Living Abroad

Are American expats required to file a state tax return?

Two factors determine whether Americans living overseas are required to file a state tax return.

Factor 1 – State of residency before moving abroad

Factor 2 – Ties to the last state of residency

Each state has its own set of rules. Some states do not impose a state income tax; other states will tax its former residents on the worldwide income unless they cut ties to the state. Let’s review the state rules.


Which states are favorable to Americans moving abroad?

Several states do not have a state income tax. As a result of it, its residents are not required to file state tax returns whether they live in the state or abroad. The following states are the most favorable to American expats:

  • Wyoming
  • Washington
  • Texas
  • South Dakota
  • Nevada
  • Florida
  • Alaska

Two states like Tennessee and New Hampshire are also friendly to American expats because they collect taxes on interest and dividends only.


Which states are not favorable to American Expats Residing Abroad?

The most unfavorable states to Americans moving overseas are New Mexico, Virginia, South Carolina, and California. These states impose a lot of restrictions. Moreover, these states will not release a taxpayer from the state tax return requirements unless they prove that they cut ties to the state. These states look at different factors to determine the ties to the state like dependents, a driver’s license, voting card, real estate, US address, bank account, mail, library cards, memberships etc .


Which states are neutral to US citizens and green card holders moving overseas?

Other states are neutral to Americans moving abroad. As long as an American has been outside of the state for 6 months and s/he can prove residency somewhere else, s/he will be released from the state tax return filing.


Are American expats living abroad required to file a state tax return if they own a property in a state?

It is quite common among American expats to own a house or condo in the USA. If a US taxpayer owns a rental property in a state, s/he will be required to file a state tax return in a corresponding state. It is important to report all rental income and deductions.


If American expats require help with state tax returns, please contact us. Expat tax experts at will be pleased to assist with various overseas tax issues.

How can American expats get more information about each state?

For the convenience of our clients, we prepared a list of all states below.

Comments are closed.