Part of the U.S. Expat Tax Series by Tax.Travel

This article is part of Antravia’s U.S. Expat Tax Series - a collection of practical guides for Americans living or working abroad. Whether you’re a long-term expat, digital nomad, or remote entrepreneur, these resources explain how to stay compliant with the IRS while reducing double taxation and managing your finances internationally.

State Residency for US Expats: How States Tax Americans Abroad in 2025

For US citizens and green card holders living overseas, filing a federal return each year is unavoidable. The United States taxes based on citizenship, not residency, which means worldwide income is always reportable. In 2025, the Foreign Earned Income Exclusion (FEIE) increases to $130,000 for qualifying taxpayers, offering significant federal relief. However, state tax rules operate separately, and many states ignore FEIE entirely.

Whether an American abroad owes state taxes comes down to three questions:

1. Are you still considered a resident or domiciliary of your former state?

2. Does that state tax worldwide income?

3. Have you severed ties clearly enough to prove you no longer belong there?

This guide provides a detailed overview of how states treat expats, which states are easiest to leave, which are most aggressive, and what practical steps Americans abroad should take to reduce or eliminate state tax obligations in 2025.

All information is consistent with publicly available state tax guidance as of November 2025.

1. Federal vs State Taxation: How they differ for Expats

At the federal level, expats must file a tax return if their income exceeds the basic filing thresholds (for single filers, $15,000 in 2025). They can benefit from FEIE, the Foreign Housing Exclusion, and the Foreign Tax Credit.

States do not follow these rules. Most states:

• Do not recognize the FEIE,

• Do not offer a foreign tax credit,

• Do tax worldwide income if you remain a resident or domiciliary.

State filing status depends on residency only. Generally:

• Residents/domiciliaries are taxed on all worldwide income.

• Non-residents pay tax only on income sourced to that state, such as rental property or business activity.

• Part-year residents report worldwide income for the period of residence and then state-sourced income after departure.

In 2025, many states are investing in stronger compliance systems. Interstate data agreements and analytics tools allow states such as California and New York to identify expats who have not clearly exited residency, even years after moving overseas.

2. Domicile vs Statutory Residency

Understanding the distinction between these two concepts is essential.

Domicile

Your domicile is your permanent legal home. It is determined by intent: where you plan to return, even if you live abroad indefinitely. States examine:

• Where you vote

• Where you hold a driver’s license

• Where your family lives

• Where you bank

• Where sentimental or “near and dear” items are kept

• Where you own or maintain a home

Domicile does not change automatically when you move abroad. It must be affirmatively replaced with a new domicile.

Statutory (or Physical) Residency

Many states also consider you a resident if you:

• Spend more than 183 days in the state, and

• Maintain a permanent place of abode there.

New York is the best-known example. Even if you are domiciled elsewhere, keeping an apartment and spending 184 days in the state makes you a tax resident.

Burden of Proof

The taxpayer must prove they are no longer resident. “Sticky states” assume continued residency until every tie is broken. Even seemingly minor connections, such as mail sent to a parent’s house or an unused local bank account—can be used to assert residency.

3. States With No Income Tax: The least Complicated for Expats

There are nine US states with no personal income tax, making them the simplest for expats to maintain as their domicile. Americans abroad who establish domicile in these states typically owe no state tax unless they have state-sourced income, such as rental property.

The nine states with no income tax in 2025 are:
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

What Expats should know about each State

• Alaska: No income tax. Establishing residency can be harder without physical presence; vehicle inspections apply if keeping a car.

• Florida: One of the simplest for expats. No need for long-term presence once residency is established. Virtual mail services are accepted.

• Nevada: Straightforward requirements and no income tax. The state generally expects at least a short period of physical presence to establish residency.

• New Hampshire: No tax on wages. Its remaining tax on dividends and interest was fully repealed in 2025.

• South Dakota: Popular among long-term travelers and digital nomads. Very little in-person bureaucracy. A brief visit is required to obtain a driver’s license.

• Tennessee: No tax on wages; the last remnant of its investment-income tax was removed in 2021.

• Texas: No income tax, but residency requires a genuine physical address.

• Washington: No income tax on wages. There is a capital gains tax on certain high-income investors.

• Wyoming: No income tax. Very long driver’s license renewal cycles, but a physical address is still required.

For many expats, relocating domicile to Florida or South Dakota before moving overseas avoids state-level complications entirely.

4. Best States for Expats in 2025

Based on residency requirements, tax rules, ease of establishing domicile, and audit tendencies, Florida and South Dakota remain the most expat-friendly states.

Florida

Florida’s requirements are clear, practical, and easy to maintain from abroad. There is no need for extended time in the state after domicile is established. Additional advantages include strong asset-protection laws and no state estate tax.

South Dakota

South Dakota is extremely straightforward administratively. Many processes can be completed online. The main requirement is proof of at least one overnight stay every five years to renew a driver’s license.

Other Suitable Choices

• Texas offers a wide range of practical benefits but requires a physical residential address.

• Nevada and Wyoming are easy in terms of taxes but require practical residency proof such as housing and vehicle rules.

5. “Sticky” States: The hardest to leave

Some states have a reputation for aggressively asserting residency over taxpayers who move overseas. These states tax worldwide income, rarely accept expat claims of relocation without exhaustive documentation, and conduct regular residency audits.

In 2025, the most difficult states to exit include:

California

California presumes that time abroad is temporary unless the taxpayer demonstrates otherwise with extensive evidence. California does not recognize FEIE. The state uses its “closest connection” test to assess whether ties abroad exceed ties to California.

New York

New York evaluates both domicile and the 183-day statutory residency test. Maintaining even a small apartment can trigger residency. New York does not recognize the FEIE, and foreign tax credits generally apply only to Canadian taxes.

Hawaii

Hawaii taxes worldwide income and applies intricate sourcing rules. Expatriates must prove foreign permanence with strong documentation.

New Jersey, Virginia, South Carolina, and New Mexico

These states assume continued residency unless all ties are severed. Day-count evidence, property records, foreign visas, and foreign employment contracts are often required during audits.

These states also share data with federal and other state agencies, and may use airline travel records, banking activity, or property information to challenge expat positions.

6. How to determine your Residency Status in 2025

To assess whether you are still considered a resident for state tax purposes, examine:

1. Days spent in the state: Many states use a 183-day threshold.

2. Domicile indicators: Driver’s license, voter registration, property ownership, family location, banking, and storage of personal belongings.

3. State-specific residency tests: New York’s “permanent abode” test or California’s “closest connection” test.

4. Income sources: State-sourced income often requires a non-resident return even if you clearly live abroad.

Tools like TurboTax’s residency questionnaires, as well as official state tax websites, can help evaluate status. When uncertain, professional advice is strongly recommended, especially as penalties on under-reported state taxes can exceed 25% plus interest.

7. How to Change State Residency before or while Living Abroad

A clean, well-documented exit is essential. The most common mistakes involve retaining small ties that states interpret as ongoing residency.

Steps to Change Domicile

1. Choose your new state intentionally.
Selecting a no-tax state simplifies long-term compliance.

2. Sever ties with the old state.

• Terminate leases and sell or rent out property.

• Move personal belongings out of the state.

• Cancel your driver’s license and voter registration.

• Close local bank accounts and transfer mailing addresses.

• Limit visits back to the state in the first year.

• Maintain thorough documentation (leases, utility closures, emails, travel logs).

3. Establish ties to your new state.

• Obtain a driver’s license.

• Register to vote.

• Open a local bank account.

• Use a compliant mailing address or obtain a local lease.

• Demonstrate community or administrative ties (local doctors, clubs, or service providers).

4. File correctly during the transition.
Most expats must file a part-year return when changing residency and a non-resident return if they still earn state-sourced income afterward.

Key Pitfalls

• Returning frequently soon after moving abroad.

• Continuing remote work for a business tied to the old state.

• Leaving a property available for use.

• Retaining a driver’s license or voter registration.

In 2025, states are also scrutinizing digital nomads who conduct remote work while temporarily present within their borders.

8. Filing Requirements for Expats

Expats may need to file:

• A part-year resident return if they left the state mid-year, reporting worldwide income up to the move date.

• A non-resident return if they earn income tied to that state, even modest rental income.

• No state return at all if they clearly severed residency and have no state-sourced income.

Deadlines generally follow the federal calendar. Expats automatically receive a two-month extension to June 15, although payments remain due on April 15.

Foreign Tax Credits rarely apply at the state level, though some states, such as Colorado, offer limited credits.

9. Strategies for Reducing State Tax Exposure in 2025

• Conduct an annual residency audit to ensure no accidental ties remain.

• Use day-count apps to track any time spent in the US.

• Shift business activity to foreign entities or jurisdictions.

• Move domicile to a no-tax state before moving abroad, especially for high earners.

• Keep extensive records for at least seven years.

• Work with expat-specialized CPAs who understand state-level residency audits.

Final Note

State taxation can significantly affect Americans abroad, especially those earning above FEIE thresholds or those from states that aggressively pursue former residents. By establishing a clear no-tax domicile before leaving the US, and by meticulously documenting your relocation, you can often eliminate state income tax entirely.

This guide provides general education and context only. For personalised advice, always consult a qualified expat tax professional.

Looking for more expat tax guidance? Visit tax.travel/us-expats for detailed resources on filing from abroad, FBAR and FATCA rules, and other essentials for U.S. citizens overseas.

Need help with your U.S. taxes abroad?

Antravia supports American expats, freelancers, and digital nomads with expert tax and accounting guidance. We help you file accurately, claim the right exclusions, and stay compliant wherever you live.

Talk to Antravia →

References

• Foreign earned income exclusion: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

• 2025 State Income Tax Rates and Brackets: https://taxfoundation.org/data/all/state/state-income-tax-rates/

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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