US State Taxes?

Hello Helen -

I'm so glad you're here to participate!  Could you clarify the issue of state taxes for expats?  I've read that some states feel that they have the right to tax you on income earned overseas, with the justification that your last place of residence was their state, and therefore it can be assumed you would return to their state.  Does that make sense to you?

Is this accurate information?  And, if so, does it make any sense to change residency to a state that doesn't do this before moving to the UK?  (Easy for us to do, actually.)

I'd also like to know if there is anything else (tax-wise!) that my husband and I should get in order before moving. We're both American and his company is transferring him.

I'll definitely be emailing you directly, because tax issues just make brain shut down.  I can't picture how we'll handle things next year when we have to file our returns for the 5 months we've worked here in the States, and then do British tax returns to...

Thanks!

Hi Lori

Different States have different rules. Some States are "domicile" States. This means that if you are a domicile of that State you cannot break residency with the State simply by moving to another country / State.  For instance Wisconsin is one of these States and to break residency with this State you need to establish domicile in another country / State.  This mean you need to sever all your ties with Wisconsin and establish new ones with another State / country.  Intentions and future actions are also key.  For instance if you sever all ties with Wiscounsin in 2003 and live in the UK for the next 3 years and then go back to Wiscounsin after your stay in the UK, you clearly did not shift your domicile.

Most states are non-domicile States (e.g. NY, NJ, CA, ...) and you can break residency with these states when you move to another State / country.

State filing / residency is a mine field and it is better to speak about specific situations rather than in general terms as I could write a book otherwise.

Therefore feel free to send me an e-mail with your specific situation, the state you are from, etc... and I will address the related issues .

Regards
Helen