State Income Tax Exemptions for Expat Americans

As an expat American, you are required to file taxes. Regardless of which country is currently your home, you are required to file an annual income tax return with the Internal Revenue Service in the United States.

If you meet the minimum filing requirements, you must file a US tax return, regardless of whether you are an American citizen or a green card holder. Even if you never paid taxes when you were actually residing in the United States, you may be eligible for tax returns as an expat.

State Taxes for Expats

Apart from your federal tax eligibility, you may also qualify to pay state taxes, depending on the state that you were residing in before you moved abroad. Determining your eligibility for state taxes is a complex task, so get professional advice from a tax planner before you finalize your move overseas.

There are nine states that do not collect state income tax from residents, meaning that expats from these states are also not eligible for state taxes. These states are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

If you are an expat from Tennessee and New Hampshire, breathe easy–these states only tax interest and dividends, significantly reducing your overall tax burden.

Expats moving out of California, South Carolina, Virginia and New Mexico may not be as lucky. Taxpayers in these states will have to prove that they are not returning to the state in order to avail of any income tax exemption. If you cannot prove that you have no intention of returning, then you must file a state income tax return along with your federal tax return.

There may be ways that you can reduce your tax burden if you are from any of these states. You can terminate your residency in the state by transferring or moving residency to one of the nine states that do have income tax exemptions for expats.

How to Reduce US Taxes on Foreign Income

You can reduce US income tax liability by establishing that you already paid taxes on this income in the country that you currently reside in. That can significantly lower the taxes that you owe. However, for this, you must currently reside in a country that has a tax treaty with the United States.

Get sound tax and financial advice before a move abroad to reduce your tax liability. Remember, your tax liability could be permanent, so take steps to reduce your tax burden before your move, if possible.

Get a complimentary copy of the American expat guide at for more information about the financial planning process as an American expat. You can also visit and