What to do about state taxes

In the Fall I'm moving to England to work for a UK university.
I know that I'll be paying UK taxes and that I'll still have to file a 1040, but
as my yearly wages will be way under $80k I understand that I probably
won't have to pay any US tax becasue of the Foreign Earned Income
Exclusion, but what do I do about state taxes. I live in MA.

Each State is different.

It all depends when they consider you no longer living in the state.  You will obviously have to file for the period you did live in the state this year.  Information about who needs to file and how can be found here: http://www.massdor.com/help/q_and_a.htm

For this year, you will only be able to claim the foreign earned income deduction for the portion of the year that you are not resident in the states and it will only start once you have been out of the states for the first year.  So you most likely will have to file an extension to get to the point where you can prove you have been gone for 12 months.

Also, do you plan to maintain an abode in the states and how long to you plan to be in the UK?  These all have bearing on what sort of deductions you might be able to claim in the UK and the states...

Thanks,
I have a work permit, but I don't know how long I'll be in the UK -
it all depends on how the job goes, there's no time limit to the appointment
and the HR dept. says they can renew the permit easily. Who knows I
might meet someone and get married I'm renting in MA right now so I won't have
an "abode" in MA once I leave (unless you count my parents' place) and I
really want to buy a place in the UK if I can to get on the property ladder.

Oh no I'm confused. I looked at the MA DOR website and it made things worse.
Looks like I'm domicled in MA right now. When I move to England the UK will
consider me resident not domiciled. However, as I'm leaving MA to live in
England and I don't know when or if I'll be back will MA consider me to have
established a new domicile?

Can the Feds consider me to be domiciled in the US, but MA consider me to
be domiciled in the UK??? I ask as it seems that if you are domiciled in MA
you are also considered resident for tax and MA won't let you exclude foreign
income or take a tax credit for taxes paid to a foreign country.

See a professional for how to break residence.  MA's a particularly tough state to do so.

Maybe I've been beating myself up unnecessarily on this one. When I
worked in CA I didn't sweat the MA tax, just filed a part
year resident form the year I moved and after that filed only CA resident forms.
I'm going to do the same thing moving to England.
In fact a Brit friend is always saying its turning into the 51st state
Anyone out there done this?

OK so here's what I found online at Don Nelson's site. I'm going to severe all links with MA
when I move to England and as my only income will be a UK salary and some dividends from
mutual funds in the US it looks like I won't have to file an MA form.

Anyone out there done the same

http://www.taxmeless.com/index.html

From Mr Nelson's site which is excellent.

"Avoiding  U.S. State Taxes
 

Do not assume just because you moved out of the U.S. that your previous state of residence has no claim on taxing your income. Many states such as 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 until years later. Some of the criteria that a state looks at to determine if you are a resident for state income tax purposes includes your driver license, if you register to vote there,  if you maintain an address there, the location of your bank accounts, if you own or rent real property there, the license plates on your cars, and if you still receive utility bills in that state.  There are many other factors used by state taxing agencies to determine if you are a resident, but they are too numerous to mention here. You must be careful to reduce or eliminate all indices of residency or your previous state of residency in the U.S. will come after you for state income taxes. You must carefully plan your departure from your previous home state both reviewing the laws and taking the actual steps necessary to prove to that state you no longer have a "tax domicile" there after you move abroad.  If you do not, the taxes, penalties and interest later assessed by that state can be huge.

You do have to continue to  pay taxes in a state if you receive rental income there or receive income from a trade or business located there, even if you are no longer a resident.  Investment income such as from stock sales, dividends, and interest are not subject to state tax unless you live there.  Pensions are no longer taxable in the state in which you earned the pension if  you permanently leave that state.

I would be VERY sceptical about following Don Nelson's advice.  It appears to be suggesting that you cease all connections with your current State of domicile (MA) and acquire similar connections in the UK.

Firstly this may not work from the perspective of MA DOR and secondly it could significantly increase the amount of UK tax you may pay.  You need advice from a UK/US angle (with a State twist), not from a CA/Mexican view.

Follow Lizzit's recommendation.

I would be VERY sceptical about following Don Nelson's advice.  It appears to be suggesting that you cease all connections with your current State of domicile (MA) and acquire similar connections in the UK.

Firstly this may not work from the perspective of MA DOR and secondly it could significantly increase the amount of UK tax you may pay.  You need advice from a UK/US angle (with a State twist), not from a CA/Mexican view.

Follow Lizzit's recommendation.

When I moved to CA from MA I stopped doing MA state taxes and there wasn't an issue. I came back to MA and started doing MA resident taxes again and stopped filing in CA, no problem. Won't moving to England for an indefinite period be the same?

There must be someone who's moved from MA to the UK and knows the answer to this situation from practical experience.

1. Where were you born?  Was it in MA or CA?
2. Why did you go to CA?  Was it for an indefinite period?
3. Where was your father born?
4. How long will you be in the UK?
5. Where are your family now?
6. Where are your personal possessions (eg school diplomas) kept?
7. Where are your bank accounts, retirement accounts, savings etc?
8. Where is your drivers licence from?
9. Where are an alumnus of?
10. Where have actually lived and for how long and for what reasons?
11. Where will you be claiming you are domiciled from a UK tax perspective.

Please provide this information so that we can point you to the relevant sections of MA and CA State codes and related Court decicions in both States.  As the UK has an unwritten constitution, we can point you only to case law.

1. Where were you born?  Was it in MA or CA?
2. Why did you go to CA?  Was it for an indefinite period?
3. Where was your father born?
4. How long will you be in the UK?
5. Where are your family now?
6. Where are your personal possessions (eg school diplomas) kept?
7. Where are your bank accounts, retirement accounts, savings etc?
8. Where is your drivers licence from?
9. Where are an alumnus of?
10. Where have actually lived and for how long and for what reasons?
11. Where will you be claiming you are domiciled from a UK tax perspective.

Please provide this information so that we can point you to the relevant sections of MA and CA State codes and related Court decicions in both States.  As the UK has an unwritten constitution, we can point you only to case law.

1 MA
2 To work at a National Lab, indefinite period, ended up being 3 years
3 NH
4 Don't know, I have a permanent appointment and will be getting some merit visa next year
5 MA
6 I'm selling the stuff in my apartment, my parents have some of my old stuff like books, but I'm taking all
papers like diplomas
7 Small IRA and mutual funds with a broker in PA. I'm closing other US accounts
8. MA I plan to get a UK one
9 MA school
10 MA school and college 27 years, CA first job 3 years, MA second job 2 years, UK will be third job
11. Don't know I  have no immediate plans to reuturn to the US I plan to be in the UK for the forseeable future.

Fun isn't it.  Not quite straightforward as you would think.

Guya is right, establishing your domicile in the UK is not necessarily what you want to do.  You have lots of tax implications.  Since you are not sure if you will be in the UK > 3 years, you might as well take the tax advantages there and continue to deal with MA state tax.  Again professional tax advice appears to be in your future.

I am lucky in the sense that I am moving from Illinois.  I cease to become a resident as soon as I leave and intend not to move back, and even then, they start with 1040 Income as the base, which means the foreign earned income credit is applied to state taxes.

Master Blaster.

Intent is not provable.  Like, do you want to stay here indefinitely?  Or return home within one year?  two?  three?  ten?  when the kids are grown?  upon retirement only?  Maybe it's never.  Only you know the answer to that question.  The future likewise is an unknown event until it actually occurs.

However, once you put something in writing, such as your answers to Guya's qs on a publicly accessible website, the IRS, the IR, and MA all have written proof of what your intent is and what you plan to do.  Since you don't yet know all the consequences of what one intention is over another, you may have just shot yourself in the foot.  I suggested you talk to a professional, as did Guya, so as to avoid putting unprovable things in writing and turning them into concrete things that have only one interpretable course of action for tax purposes.

In the future, you may wish to phrase everything that is yet-to-be in hypothetical terms until you know what all the consequences of your yet-to-be-taken actions are.

Arrghhhhh!