Know Your State Tax Obligations as a US Expat

Living abroad as an expatriate is an exciting adventure, but it doesn't necessarily free you from all your tax obligations back in the states. While many states won't require you to file income tax returns once you're overseas, some can be rather "sticky" when it comes to residency rules. States like California, New Mexico, South Carolina, and Virginia, for instance, tend to maintain a firm grip on their tax requirements.

Here's a breakdown of some essential points to consider:

1. Residency Rules: In some states, your tax status hinges on the number of days you spend within their borders. If you cross a certain threshold, you might be deemed a resident and become liable for state taxes.

2. Domicile States: These states have stricter criteria for breaking residency. Even if you've set up a new life abroad, they may still consider you a resident if you maintain strong ties to the state, such as owning property, having family there, or holding a state driver's license.

3. Substantial Ties: "Substantial ties" can encompass various factors, like property ownership, the presence of family members, local bank accounts or investments, voter registration, or vehicle registrations.

4. Duration of Absence: Some states adopt the six-month rule, where you're considered a non-resident if you've spent more than six months outside the state. However, this timeline can differ.

5. Foreign Earned Income Exclusion and Foreign Tax Credit: While the IRS allows these deductions for federal taxes, not all states follow suit. Some states may still tax your foreign earnings.

6. Seek Professional Guidance: Given the intricate web of state tax laws, it's wise to consult a tax professional specializing in expatriate taxation. They can help you navigate the specifics and ensure you stay on the right side of the law.

In this ever-evolving tax landscape, it's crucial to stay informed and enlist professional tax assistance when necessary.