How to Change Your State Residency While Living Abroad

All US Persons who meet the filing threshold are required to file a federal tax return every year, no matter where they live. In addition to this, some expats also have to file state taxes. Fortunately, you can change your state residency to avoid this—even while living abroad. Here’s how. 

How to Determine State Residency while living abroad? 

In many cases, expats are required to file a tax return with the state they lived in before moving abroad. However, every state has its own laws surrounding this issue. Depending on which state you used to call home, you may be exempt. 

The key to answering this is knowing whether you are still considered a resident of a state—and if so, which one. If you are a resident for tax purposes, that state will typically be able to impose an income tax on you. Usually, you will be considered a resident if you lived in a given state for more than half of the year. 

A state may also consider you a resident if: 

• You own a home there 
• Your spouse and/or children live there 

• You have a driver’s license or ID card from that state 
• You’re registered to vote there 
• Your vehicle is registered there 
• You maintain a bank account there 
• You maintain a mailing address there 

So-called “sticky states” are notorious for using even the slightest justification to tax former residents. These states include: 
 

• California 
• South Carolina 
• New Mexico 

• Virginia 
• New York 

On the other hand, some states have no income tax. Even if you are a resident of these states, you will not be required to file a tax return. Currently, the following states are tax-free: 

• Alaska 
• Florida 
• Nevada 
• South Dakota 
• Texas 

• Washington State 
• Wyoming 

(Additionally, Tennessee and New Hampshire only assess income tax on dividends and interest income.) 

So, to determine if you are required to file a state tax return, you need to answer these questions: 

• Am I considered a resident of any state? 
• Does that state impose an income tax? 

If the answer to both is yes, you are likely required to file a return. 

How to Change Your State Residency While Living Abroad 

To change your state residence while living abroad, you will need to complete the following two steps: 

• Terminate your residency in your former state 

• Establish residency in a new state 

Let’s take a closer look at each step. 

1. Terminate Your State Residency 

Terminating your state residency could be a simple or complicated process, depending on which state you’re leaving. For some states, it’s as easy as living abroad for at least half of the year. Others will require more effort to cut ties completely. You may have to: 

• Sell any property you own in that state 
• Close your financial accounts in that state (e.g., a bank account) 
• Move your driver’s license or state ID to a new state 

• Move your voter registration to a new state 
• Sell your vehicle or change your auto registration to a new state 
• Move your immediate family out of the state 
• Leave any local associations, such as social clubs or business organizations 
• Remove any local mailing addresses you have 

Review the residency regulations for your former state to learn what steps you will need to take. 

2. Establish Residency in a New State 

If you’ve successfully terminated your residence in your former state, you can technically stop there. This would mean you will not be considered a resident of any US state. However, that isn’t always an option. Some states won’t allow you to terminate your residency until you’ve established residency in a new state—even if you live outside the US. Plus, there are benefits to maintaining state residency somewhere, even while living abroad.  

If you choose to establish residency in a new state, you will start by picking the state. It generally makes the most sense to pick a tax-free state. That way, you can enjoy all the benefits of state residency without having to worry about any state tax obligations. 

Once you know where you want to establish residency, review the requirements to be considered a resident in that state. This may include: 

• Purchasing property in that state 
• Registering a vehicle in that state 
• Applying for a state driver’s license or ID card 
• Opening a local financial account 

• Joining local associations 
• Seeing a local doctor 
• Working within the state’s borders 
• Becoming active in the local community 

Of course, some of these are impossible to do from overseas. This often makes it wise to move your residency to a new state before moving abroad. If you’ve already moved overseas, you may still be able to move your state residency. Consult an expat tax professional to learn more about your options. 

What If I’m Behind in My State Taxes?

If you are behind on your State income taxes, you should speak to a tax professional to determine exactly what is needed to comply with the relevant state. Each state has its own tax rules, so this would need to be looked at individually to determine the best course of action.

Still Have Questions Regarding Your State Residency? We Have Answers! 

We hope this guide has helped you understand how to change your state residency while living abroad. However, US tax law can be complicated for anyone—and doubly so for Americans living abroad.