Exapts and paying taxes to the USA
Posted by Shipwreck_818@reddit | expats | View on Reddit | 28 comments
I have always been curious whne it comes to being an expat and paying taxes tothe USA. I have seen many videos about people moving to Thailand, Mexico etc.
So my question is when you do beomce an expat say in Mexico do you still pay state taxes? If is based on the state you claim, such as CA or do you claim Nevada as your adres to pay no state tax then move to Mexico? I hope my quesiton makes sense, I'm just gather info to better understand so when my time comes to retire I know more specific details when it comes to becoming an Expat. Thank you in advance.
Ktjoonbug@reddit
I moved from California to Hong Kong. You do not have to pay state taxes when you move abroad, only federal taxes. My husband works for an American company so we have to file California state tax but it's $0.
Grouchy_Tennis9195@reddit
But you’re also exempt from federal taxes up to $126,000 per year as long as you’re overseas for 330 days per year
i-love-freesias@reddit
So true. It’s just easier to change residency to a no state tax and cut all financial ties before moving abroad.
The good news is, if you have problems trying to vote in your new state, like South Dakota, you can vote in your previous state without that creating tax residency.
I have heard New York is also aggressive like California.
djmom2001@reddit
Not necessarily good to cut all financial ties. It’s going to depend on where you are going. Some countries have a tax agreement and you just pay taxes to the US depending on your situation. Also depending on where you are going there may be fewer or less access to investment opportunities.
i-love-freesias@reddit
I was talking about cutting all financial ties to your previous state, not the new state with no taxes.
NonSumQualisEram-@reddit
It's a distant second place
Gullible_Eagle4280@reddit
I’ve not heard of the $126,000 exemption you mentioned, is this for married couples? Do you happen to have a source for information regarding this?
Ktjoonbug@reddit
True
Gullible_Eagle4280@reddit
How is it zero? What deduction or other credit reduces your tax liability to zero?
blackkettle@reddit
This only true so long as you do not have/own taxable assets in California. If you own a property there for instance, or earn money in CA, the state will still come after you for taxes. You have to be careful; there are quite a lot of rules on this topic (source: native Californian 22 years abroad).
freebiscuit2002@reddit
The requirement on US citizens is to file taxes back home, wherever they live in the world. Whether you pay taxes in the US is different and depends on individual circumstances..There are protections against paying taxes in the person’s country of domicile and in the US.
No-Pea-8967@reddit
I thought the protection from paying twice was only if there is a tax treaty, which the US doesn't have with every country.
Dokibatt@reddit
Neither FEIE nor FTC require a treaty.
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
https://www.irs.gov/individuals/international-taxpayers/foreign-taxes-that-qualify-for-the-foreign-tax-credit
AFAIK Treaties tend to be for reciprocity in benefits or favorable rates.
CraigInCambodia@reddit
I file US taxes every year, but have never made enough to have to pay. I just do it because it's required. California got a bit testy with me once. They have some measure of potential intent of moving back to determine if you should have to pay. I showed them the 10+ most recent year visas and work permits and assured them I ain't moving back.
Bokbreath@reddit
you file a 1040 federal return and use your overseas address. you do not have to file state taxes.
depending on whether you are working and whether your new country has a tax treaty with the US, you may be able to offset taxes paid locally against what you owe uncle sam.
Gullible_Eagle4280@reddit
This just isn’t true as far as state taxes, it depends on what state you last had residency in prior to leaving the US.
Bokbreath@reddit
No it is not. Once you leave the US permanently there are no state taxes.
Gullible_Eagle4280@reddit
It depends on what state.
https://brighttax.com/blog/change-state-tax-residency/
Bokbreath@reddit
No it does not. The only difference is how much effort it takes to prove you are no longer a resident.
Gullible_Eagle4280@reddit
You wrote “…you do not have to file state taxes” implying you are automatically exempt. which is bad advice.
Gullible_Eagle4280@reddit
Research “sticky states” many replies here make it seem easy but it can be complicated and take some planning. It’s good you’re looking into it before moving. Here’s a good article with some pointers on the process.
https://brighttax.com/blog/change-state-tax-residency/
katmndoo@reddit
You still have to file your state taxes - whether or not you get a break because you're non-resident or part-year depends on the state and also depends on the source of your income.
You are also still required to file federal, regardless of what other jurisdiction thinks you are tax-resident. There are some protections against double-payment, and there is an exemption for income *earned* while outside the US for more than 330 days.
PurpleNurple105@reddit
My experience is, you will only file state taxes for the last year you were a resident. If you left the state in December 2024, in 2025 you file state taxes. In 2026 you would no longer file state taxes. You will always file federal as US citizens are taxed on their worldwide income as previously stated. Get an accountant, especially if the US government sends you checks, for example the corona economic impact payments, an accountant has made my life easier.
bighark@reddit
Yes, you file state taxes for the state where you last had residency. Yes, it's possible to claim a no-income-tax state, but you have to establish residency there. You can't just make it up.
Ktjoonbug@reddit
That's not true. I moved to Asia as I commented here but actually we last lived in Washington state and even owned a house there. I do not have to file Washington state taxes. I have to file California state income tax because my husband works for a company based there but we pay $0 for it. We just have to do the filing. We just end up paying federal taxes.
katmndoo@reddit
Your experience in WA does not refute /u/bighark statement.
WA does not have state income tax, so you wouldn't be paying it if you lived there either.
Ktjoonbug@reddit
Yes true but I know many other expats
katmndoo@reddit
And their experience in a state with no income tax also doesn't matter.
Also be aware that income sourced in the state even while non-resident is often taxable. Depends on the state though. I spent years paying income tax to two states I did not live in because I had income sourced their. So your blanket statement is false.