Do U.S. expats have to pay state taxes?

That’s a very common question we hear from U.S expats. All U.S citizens or green card holders, who are earning above the U.S income tax filing threshold, are required by the I.R.S to file an annual tax return. This applies to U.S. residents and U.S. citizens living overseas. In many cases you as an expat may also have an obligation to pay taxes in the last state you where considered a resident, before embarking on your overseas adventure.

U.S expats and state taxes

The short answer to our original question is yes. If you are required to file a federal tax return on your income, interests, rental income and dividends, very often this applies at the state level as well. The U.S tax system is notoriously complex and the regulations vary widely from state to state. There are many factors that will determine whether you are considered a resident of any given state regarding state taxes, including;

  • Do you own property or make mortgage payments in that state
  • Do you own assets in that state
  • Are you registered to vote in the state
  • Do you live permanently overseas
  • Do you have a car registered in the state

This list is by no means complete and in some cases you don’t have to be considered a resident of a given state to be liable to pay taxes there. At the bottom of this page you can find a list of links to the IRS webpage for each U.S. state. On each page you will find a link to the website of the state tax administration in question. Moneywood understands how difficult it can be to navigate the U.S federal and state tax system, so please feel free to contact our expert team if you need any help.

Good news

There are some states where expats are not obliged to file state taxes, so if you are considered a resident in one the following states, filing should be a little easier.

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

It may also be of interest to note that New Hampshire and Tennessee only levy taxes on interest and dividends.

Will I be taxed twice as an expat?

Many expats worry about this question unnecessarily, as there are benefits available to expats, enabling  you to avoid double taxation on your income. The Foreign Earned Income exclusion and the Foreign Tax Credit for example.

Complicated states

Your residency status will vary considerably depending on the state in question and all states have have different rules. The states in the list below however, have very specific regulations concerning state taxes and residency. They are generally considered ‘sticky states’ by expats.

  • New York
  • New Mexico
  • South Carolina
  • California
  • Virginia

Ohio, Regional Income Tax Agency (RITA)

U.S. expats who have been residents or may still be considered residents of a RITA municipality in Ohio, may have to file (Form 37) if they meet any of the criteria listed below.

  • Nonresidents of a RITA municipality who have earned income from a RITA municipality that is not subject to employer withholding, or if the employer did not fully withhold for the municipality of employment.
  • Nonresidents of a RITA municipality who have earned non wage income within a RITA municipality.
  • Nonresidents of a RITA municipality who conduct business in a RITA municipality even if no tax is due.

For more information regarding (RITA) Ohio and relevant filing regulations for each municipality, you can visit their website here.

If you are considered a resident of one of these states we highly recommend seeking advice from a tax advisor, of course Moneywood is always happy to help you with this.

Further reading

Moneywood has also published informative articles about U.S. tax return (Form 1040), The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR). Our team of professionals at moneywood has many years of experience supporting our valued expat community when navigating the U.S. tax system. If you have any questions or need advice please don’t hesitate to contact us, we are here to help.

 

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