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Moving Abroad: Difference Between Federal and State Taxes in the US
07 May 2026
You move abroad, settle into a new routine, maybe start paying local taxes, and then somehow, US state taxes come up again. It feels unnecessary. You’re already filing with the Internal Revenue Service, so why would a state still matter?
That’s where things start to get a bit unclear. Federal taxes follow a clear rule. State taxes don’t always. And for expats, that difference tends to surface later, usually when you thought you were already done with the system.
Federal vs State Taxes
Federal taxes come from the US government and apply to your worldwide income, no matter where you live. State taxes are levied by individual states, and whether they apply depends on your residency or the source of your income.
So yes, every US expat has to deal with federal taxes. State taxes, not necessarily. But assuming you’re automatically exempt can lead to problems.
What Federal Taxes Mean for Americans Abroad
The US taxes based on citizenship, not just residency. Which, even after a few years abroad, still catches people off guard.
If you’re American, you generally need to file a US tax return. It doesn’t matter if your income is earned entirely outside the US. Salary, freelance work, rental income, dividends. It all gets reported.
That said, filing and paying are not the same thing. Many expats reduce or eliminate their US tax liability through provisions such as the Foreign Earned Income Exclusion or the Foreign Tax Credit.
How State Taxes Work
State taxes don’t follow a single system. Each state has its own rules, its own definitions, its own way of deciding who counts as a resident.
Some states focus on where you live. Others look at the source of your income. And then there are states that seem to take everything in at once.
It’s not unusual for someone to move abroad but keep small ties to their previous state. A driver’s license. A mailing address. Maybe even voter registration. None of these feels significant on its own, but together, they can suggest you never really left.
At the same time, some states don’t impose income tax at all. Which sounds simple, but only helps if your previous state no longer considers you a resident.
Do US Expats Still Have to Pay State Taxes?
It depends. If you’ve clearly and fully cut ties with your former state, you may not owe anything there. But that “clean break” is often less obvious than people expect.
Certain states, sometimes referred to as “sticky,” tend to hold on longer. California, New York, and Virginia come up often in this context. They don’t just look at where you are. They look at what you’ve kept.
For example, someone who relocates to Dubai but maintains financial accounts, property, or even a long-standing address in New York might still be seen as a resident. From their perspective, they’ve moved. From the state’s perspective, maybe not completely.
And that difference in interpretation is where state tax obligations can quietly continue.
States With No Income Tax
A few states don’t impose income tax at all. Florida, Texas, Washington, and Alaska. On paper, they seem like an easy solution.
And in some cases, they are part of a broader tax strategy. But shifting your residency isn’t as simple as naming a different state. It usually requires establishing genuine ties there and, just as importantly, breaking ties with your previous one.
That’s the part that tends to get overlooked.
Common Mistakes Expats Make With State Taxes
One of the most common is thinking that leaving the US automatically ends state tax obligations. It doesn’t always work that way.
Others keep small connections without realizing their impact. A license that hasn’t been updated. An address that still appears on official documents. Individually, they seem harmless. Together, they can suggest an ongoing residency.
And sometimes, state notices are simply ignored. Not deliberately, just because the rules aren’t clear and the situation feels uncertain.
How to Handle Federal and State Taxes as an Expat
Start with your last state of residence. Then look at how that state defines residency. From there, consider where your income is coming from and whether it creates a filing obligation.
If something feels unclear, it probably is. In that case, reviewing your residency status more closely, or even planning how to change it properly, can make a difference going forward.
Need Help Filing as a US Expat?
Federal taxes are one thing. State taxes tend to sit in that grey area where the rules exist, but don’t always feel obvious.
If you’re unsure whether a state still considers you a resident, or whether you should be filing there at all, getting a second opinion can help avoid unnecessary complications.
At Expat US Tax, the focus isn’t just on filing returns. It’s on helping expats understand how these pieces fit together, especially when state residency isn’t entirely clear.
