State Tax Obligations for Americans Living Abroad: Do Expats Still Have to Pay in 2025?

The job offer from Singapore looks perfect. $185,000 base salary, housing allowance, three-year contract. You calculate US citizens living abroad taxes—with Foreign Earned Income Exclusion, you'll exclude $130,000 and owe federal tax only on the excess. Total federal tax bill: approximately $13,200. You pack your bags, rent out your California condo, and move to Singapore. You assume your tax planning is complete but then you realize that was wrong. 

Eighteen months into your Singapore assignment, the letter arrives from California Franchise Tax Board. You owe $18,500 in California state taxes on your full $185,000 Singapore income plus penalties and interest. California doesn't recognize the Foreign Earned Income Exclusion that saved you $31,200 in federal taxes. California still considers you a resident despite living abroad for 18 months because you maintained your California driver's license, kept your car registered in California, and own property there.

In this article you'll learn exactly which nine states have no income tax and why expats from these states face no taxation for expats complications, how state tax residency and domicile work differently from federal residency, which states have the most aggressive policies taxing expats who maintain any in-state ties, how to properly sever state tax residency before moving abroad, and what happens if you earn state-sourced income while living abroad.

Which are the nine states with no income tax?

If you last lived in one of these states before moving abroad, state taxation for expats obligations are simple: you have none. These states are: 

1. Alaska
2. Florida
3. Nevada
4. South Dakota
5. Tennessee
6. Texas
7. Washington
8. Wyoming
9. New Hampshire

For example if you are moving from Florida to Singapore. There is no Florida state tax before you leave, no Florida state tax while abroad, no Florida filing requirements. You can maintain a Florida driver's license, own Florida property, and keep Florida voter registration without creating state tax liability—because Florida has no income tax to begin with.

This creates significant tax savings compared to expats from high-tax states like California (up to 13.3% state tax) or New York (up to 10.9% state tax plus NYC tax).

Three scenarios where expats owe state taxes

For the 41 states with income tax, expats face state taxation for expats in three situations.

Scenario 1: You're still considered a state resident

If your former state still considers you a resident (based on domicile or residency rules), you owe state income tax on your worldwide income—including foreign wages, self-employment income, and investment income.

This is the scenario that catches most expats by surprise. You physically live abroad but your former state still taxes you as a resident for US citizens living abroad taxes purposes.

Scenario 2: You have state-sourced income

Even if you successfully established non-residency, you owe state tax on income sourced from that state. This includes rental property income, business income from in-state operations, wages from in-state employers (working remotely for California company while abroad), and partnership/S-corporation income from in-state businesses.

Scenario 3: Part-year residency

In the year you move abroad, you're typically a part-year resident owing state tax on all income earned while a resident, plus state-sourced income earned after establishing non-residency.

Example: You lived in Massachusetts from January through June 2025, then moved to Germany. You file as a Massachusetts part-year resident for 2025, reporting all income from January-June plus any Massachusetts-sourced income from July-December.

State residency vs domicile: Critical differences

States use two different concepts to determine who owes American living abroad taxes: residency and domicile.

Residency (physical presence)

Residency is typically based on physical presence. Most states consider you a resident if you're physically present in the state for more than 183 days during the tax year. Once you move abroad, you're no longer physically present and lose resident status under this test.

Domicile (permanent home)

Domicile is your permanent home—the place you intend to return to. Domicile is "sticky"—once established, it continues until you establish a new domicile elsewhere.

Critical point: Moving from your state to a foreign country does NOT automatically change your domicile. Many states (particularly Virginia, New Mexico, South Carolina, and New York) maintain you remain a domiciliary resident owing state tax on worldwide income until you establish domicile in another U.S. state.

Why domicile matters for expats

If you move directly from Virginia to London without establishing domicile in another state, Virginia can argue you remain a Virginia domiciliary—your permanent home is still Virginia, you're just temporarily abroad. This means Virginia can tax your worldwide income including foreign wages despite you living in London for years, affecting your US expat taxation.

States most aggressive about domicile

• Virginia: Explicitly requires establishing domicile in another state to terminate Virginia residency. Moving directly abroad without passing through another state leaves Virginia domicile intact.
• California: Uses domicile concept aggressively, looking at all contacts with California to determine if you truly abandoned California domicile.
• New Mexico, South Carolina: Similar domicile rules requiring establishment of new domicile elsewhere.
• New York: Uses both 183-day residency test and domicile test, with aggressive enforcement.

California: The most aggressive "sticky" state

California is notorious for asserting tax jurisdiction over former residents who move abroad, significantly impacting US citizen living abroad taxes.

California presumes continued residency

California takes the position that residency continues until you prove you've established both residency and domicile in another state. Moving abroad creates a presumption you intend to return to California, keeping California as your domicile.

California doesn't recognize FEIE

The Foreign Earned Income Exclusion that reduces federal taxes up to $130,000 provides zero California benefit. If California considers you a resident, they tax your full foreign wages—the amount you excluded federally is still taxable to California.

Example: You earn $150,000 in Singapore.

Federal tax calculation:

• Gross income: $150,000
• FEIE exclusion: ($130,000)
• Taxable income: $20,000

California tax calculation (if they consider you a resident):

• Gross income: $150,000
• FEIE exclusion: $0 (California doesn't recognize it)
• Taxable income: $150,000
• California tax: approximately $11,500 at 7.65% effective rate

Factors California examines to determine residency

California FTB looks at all facts and circumstances for taxation for expats:

• Ties maintained in California: Driver's license, vehicle registration, professional licenses, business interests, property ownership, bank accounts, club memberships, voter registration
• Family location: Where spouse and children live (if they remain in California while you work abroad, you're likely still a California resident)
• Frequency of California visits: Regular returns to California suggest continued domicile
• Intent to return: Employment contracts indicating temporary assignment suggest California remains your domicile
• Ties to new location: Length of visa, home purchase abroad, children enrolled in foreign schools

How to establish California non-residency

To successfully terminate California residency:

Cut California ties:

• Surrender California driver's license
• Sell or rent California property (or have a tenant on long-term lease)
• Close California bank accounts or reduce to minimal activity
• Cancel California gym memberships and club memberships
• Terminate California professional licenses
• Cancel California voter registration

Establish ties abroad:

• Obtain foreign country driver's license
• Lease or purchase residence abroad
• Open foreign bank accounts for daily living
• Enroll children in foreign schools
• Obtain work visa/residency permit showing long-term presence

Document everything:

• Keep records of dates you cut California ties
• Evidence of new location establishment
• Employment contracts showing indefinite foreign assignment

File California non-resident return: File Form 540NR for the year you leave reporting as part-year resident, then continue filing 540NR annually if you have any California-sourced income

California "safe harbor" rules

California provides some safe harbor provisions where residency is presumed to end:

• Employment contract outside California for at least two years
• With spouse living abroad with you
• And no California business or property maintained during absence

Even meeting these criteria doesn't guarantee California won't assert jurisdiction—it just creates a presumption in your favor for US citizens living abroad taxes.

Virginia: Domicile rules that trap expats

Virginia explicitly states that residents moving directly abroad without establishing domicile in another U.S. state remain Virginia residents for taxation for expats purposes.

Virginia's domicile requirement

To terminate Virginia residency, you must establish both residence and domicile in another state. Moving to a foreign country without first establishing domicile elsewhere leaves Virginia as your domicile state.

Virginia Code § 58.1-302 defines domicile as "the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere".

What this means for expats from Virginia

If you move directly from Arlington, Virginia to London without establishing residency in another state first, Virginia can tax your worldwide income—including your UK wages—indefinitely until you establish domicile in another U.S. state, significantly affecting American living abroad taxes.

How to sever Virginia domicile

Option 1: Before moving abroad, establish domicile in a no-income-tax state (Florida, Texas, Nevada). Live there for 6-12 months, obtain driver's license, register to vote, open bank accounts, rent or buy property. Then move abroad. Your domicile is now Florida/Texas/Nevada, which has no income tax.

Option 2: While abroad, establish domicile in a no-income-tax state. Obtain driver's license, register to vote, rent property (or use a family member's address), and document your intent to make that state your permanent home when you return to the U.S.

Option 3: Accept that Virginia remains your domicile and file Virginia resident returns while abroad, paying Virginia tax on worldwide income.

Virginia filing requirements for expats

Virginia residents abroad must file Form 760 (Resident Return) reporting worldwide income if Virginia Adjusted Gross Income exceeds $11,950 (single) or $23,900 (married filing jointly) for 2025.

Virginia nonresidents with Virginia-sourced income file Form 763 (Nonresident Return).

Virginia filing deadlines: The standard deadline is May 1 (not April 15). Expats abroad receive an automatic extension to July 1, with possibility to extend further to November 1. However, any tax owed must be paid by May 1 to avoid interest.

New York: Statutory residency and domicile tests

New York uses both a 183-day physical presence test and a domicile test, with aggressive enforcement affecting US expat taxation.

The 183-day test

You're a New York resident if you maintain a permanent place of abode in New York and spend more than 183 days in New York during the tax year. Once you move abroad, you're no longer present 183 days and don't meet this test.

The domicile test

If New York was your domicile, it remains your domicile until you establish a new domicile elsewhere. Unlike Virginia, New York allows establishing domicile in a foreign country—you don't need to establish domicile in another U.S. state.

Proving New York non-domicile

To prove you've abandoned New York domicile:

• Cut New York ties (driver's license, voter registration, club memberships, professional licenses)
• Establish ties to new location (foreign or domestic)
• File Form IT-370 (New York Change of City Resident Status) if moving from NYC
• File Form 203-F (Report of Estimated Tax for Nonresident Individual) for any New York-sourced income

How to sever state tax residency before moving abroad

The cleanest way to eliminate state taxation for expats complications is to establish residency in a no-income-tax state before moving abroad.

Step 1: Choose a no-income-tax state

Florida, Texas, Nevada, Wyoming, South Dakota are popular choices. Consider which has best combination of no state income tax, ease of establishing residency, proximity to family, and quality of life during your 6-12 month transition.

Step 2: Move to the state and establish residency

• Rent or purchase property (even a small condo)
• Obtain state driver's license
• Register vehicles in the state
• Register to vote
• Open local bank accounts
• Obtain state health insurance if applicable
• File change of address with USPS
• Update address with all financial institutions

Step 3: Sever ties with former state

• Surrender former state driver's license
• Cancel voter registration
• Close or minimize bank accounts
• Terminate club memberships, professional licenses
• File part-year resident return for final year

Step 4: Live in new state for 6-12 months

Establish clear physical presence in the new state for 6-12 months before moving abroad. This creates clear documentation of your new domicile.

Step 5: Move abroad with clean state tax situation

Once you've established residency and domicile in a no-income-tax state, you can move abroad without state US citizen living abroad taxes complications. Your domicile remains in the no-income-tax state, which has no income tax to impose.

State-sourced income: When you must file regardless of residency

Even after successfully establishing non-residency, you must file and pay state tax on income sourced from that state, affecting American living abroad taxes.

Rental property income

If you own rental property in your former state, you must file a non-resident return reporting the rental income and paying state tax.

Example: You successfully established California non-residency and moved to Singapore. You still own a California rental property generating $35,000 in annual net income. You must file California Form 540NR (non-resident) reporting the $35,000 rental income and paying approximately $2,500 California tax.

Business income from state operations

If you own a business operating in a state, income from that business is state-sourced. Partnership and S-corporation income from entities operating in a state flows through to your personal return.

Remote work for state-based employer

This is complex and varies by state. Some states (like California and New York) may assert that wages paid by an in-state employer are state-sourced even if you perform all work abroad.

Example: You live in Germany but work remotely for a California company. California may attempt to tax your wages as California-sourced income even though you never set foot in California during the year.

Investment income generally not state-sourced

Interest, dividends, and capital gains from securities are generally not state-sourced to your former state if you're a non-resident. This income is typically sourced to your state of residence (or non-taxable if you're abroad with no U.S. state residency).

State filing deadlines for expats (2025 tax year)

State filing deadlines vary and often differ from federal deadlines for US expat taxation.

California

California automatically extends the filing deadline to June 17, 2026 for taxpayers abroad (no need to file extension request). Tax payment is due June 17 to avoid interest. Filing deadline can be further extended to December 16, 2026 by filing Form FTB 3519.

New York

New York follows the federal two-month automatic extension, giving expats until June 16, 2026 to file. File Form IT-370 by June 16 to request additional extension to October.

Virginia

Virginia requires tax payment by May 1 (different from federal April 15). Filing automatically extends to July 1 for taxpayers abroad, with further extension available to November 1. Interest accrues from May 1 on unpaid taxes.

Most other states

Most states follow the April 15 federal deadline unless you file a state-specific extension. Check your specific state's rules.

State Tax Situations for Expats (2025)

State Type	States	Expat Tax Obligation	How to Eliminate
No income tax	AK, FL, NV, SD, TN, TX, WA, WY, NH	None (no state income tax)	N/A—already eliminated
Standard domicile	Most states	None if properly severed residency and no state-sourced income	Cut ties, establish non-residency, file final part-year return
Aggressive domicile	CA, NY	Complex—must prove abandonment of domicile with strong documentation	Establish residency/domicile in another state before or during expat period
Requires new US domicile	VA, NM, SC	Cannot sever by moving abroad—must establish domicile in another U.S. state	Establish domicile in no-tax state (FL, TX, NV) before or during expat period
State-sourced income	All states	Must file non-resident return and pay tax on state-sourced income regardless of residency	Cannot eliminate if you have rental property, business, or certain wages sourced to state

How NSKT Global can help with state tax planning for expats

NSKT Global specializes in state tax residency planning for Americans moving abroad, ensuring you properly sever state taxation for expats obligations or minimize state tax impact when ties must be maintained.

We offer comprehensive state tax residency services including residency determination analysis evaluating whether your former state still considers you a resident and your exposure to state taxation, domicile severance planning creating step-by-step plans to sever residency from aggressive states. We also assist with state-sourced income planning analyzing rental property, business income, and other state-sourced income to determine ongoing filing requirements, and part-year resident return preparation filing accurate returns for the year you move abroad.

Whether you're planning a move abroad and want to eliminate state taxation for expats complications before you leave, currently abroad and receiving state tax notices from your former state, maintaining rental property or business interests in your former state, or facing a state residency audit claiming you owe multiple years of back taxes, our expertise ensures you properly establish non-residency with documented evidence, minimize ongoing state tax obligations while abroad, file required non-resident returns for state-sourced income, and defend against aggressive state assertions of continued residency.