Don’t assume that just because you moved out of the US, your previous resident state has no claim on taxing your income. Many states make it very difficult to give up your “tax domicile” in the state and require that you file state income tax returns (and pay the tax) even if you do not move back to the state.
Many states such as Hawaii, California, Virginia, New Mexico and South Carolina make it very difficult to give up your “tax domicile” in the state and require that you file state income tax returns (and pay the tax) even if you do not move back to the state.
You do have to continue to pay taxes in a state if you receive source income from that state such as rental income from property located with that state or receive income from a trade or business located there, even if you are no longer a resident. However, Investment Income from things like stock sales, dividends, and interest are not subject to state tax unless you still have your tax domicile in the state. Generally you can only give up your tax domicile if you establish permanent residency abroad. The rules defining “tax domicile” vary significantly among states.
At WS CPAs, our team of expat tax specialists is here to ensure our clients receive the best possible tax outcomes. With decades of experience, we have the tools and knowhow to help you navigate this complex and changing landscape of expatriate tax.
Virtually all of the states look at the traditional traits of residency to determine if you are a resident for state income tax purposes. There are many other factors used by state taxing agencies to determine if you are a resident.
Some of those items include the following:
1. Your driver’s license (many states only allow “residents” to have a driver’s license)
2. Voter registration
3. Length of time in the state
4. Do you maintain an address in the state
5. Location of bank accounts
6. Do you own or rent real property in the state
7. The license plates on cars
8. Utility bills in that state
9. Location of family
10. Hunting and fishing licenses
Expats must be careful to reduce or eliminate all indicators of residency in the previous state of residency in the US. We can help you plan your departure from your home state so that you no longer have a “tax domicile” there after you move abroad.
Our CPA firm features an innovative tax preparation system that expedites the preparation of your US expat tax return no matter where you live in the world. We have a secure client portal system, which allows us to retrieve your tax documents and to provide our completed returns to you through a system that is much safer than e-mail. We also have Skype technology available for voice and video conferencing to help facilitate communication. Information technology now allows Americans around the world to obtain our professional CPA assistance no matter where they live.
We can prepare your returns wherever you are.