How to Change Your State Residency While Living Abroad

All US citizens 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 didn’t know you were required to file US taxes as an expat, you’re not alone. Many expats are unaware of this requirement. (After all, the US is one of only two countries in the world that taxes citizens regardless of where they live—the other being Eritrea.) 

If you’re behind on filing your state taxes, the only solution is to file your delinquent returns and come into compliance. Unfortunately, you may have to pay interest and even penalties based on any taxes you owed. 

The good news is that if you’re also behind on filing your federal taxes, you can catch up without facing any penalties. The IRS offers an amnesty program called the Streamlined Filing Compliance Procedures. By using this program, you can erase any fines you might have accrued by failing to file a federal tax return when required. (These penalties are likely to be much higher than for your state taxes anyway.) 

To use the Streamlined Filing Compliance Procedures, all you have to do is: 

• Self-certify that your failure to file was an accident, not a willful refusal 
• File the last three delinquent income tax returns and pay any delinquent taxes you owed during that time (with interest) 
• File Foreign Bank Account Reports (FBARs) for the last six years 

This will bring you into compliance with IRS regulations. 

Still Have Questions? 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.