U.S. Tax Preparation Worldwide   James Maertin CPA

 
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Tax Guide 

IRS Tax Law Changes

Americans Abroad

Capital Gains, Interest and Dividends

Deductions

Dependents

Education Credits, Scholarships

Foreign Bank Reporting

Foreign Nationals

Social Security, Medicare, Self Employment Tax

State Taxes

Tax Deadlines, Extensions, Late Payments, Estimated Tax

Tax Resident, Nonresident, Dual Status

Other Topics

State Taxes


 

Most individual U.S. states assess a state personal income tax.  This is in addition to federal income tax. State tax departments are separate entities from the federal tax agency, the Internal Revenue Service (IRS). Some local governments also impose an income tax, often based on state income tax calculations. Not all states have a personal income tax, but those that don't still have to pay for roads and schools, so other taxes may be higher. For example, Texas has high property taxes, and Washington has high sales tax.

States with no personal income tax are (with 2 exceptions):

State tax rules vary widely however most states follow the federal Internal Revenue Code to a considerable extent. 

 

States with an income tax generally begin their state tax calculations with either federal Adjusted Gross Income (AGI) or Taxable Income, with some additions/exclusions, etc.  States with their own tax calculations are Alabama,

Arkansas, Massachusetts, Mississippi, New Jersey, and Pennsylvania.  Depending on the state, the tax rate may be fixed for all income levels, or it may be graduated. 

 

2018 Tax Changes

Because the provisions of the new federal tax law often flow through to states, some states are acting to make exceptions to the federal tax changes.  For example, California and New York taxpayers who claim the standard deduction on their federal return will still be able to claim itemized deductions on their state return.  These include unreimbursed employee business expenses and miscellaneous itemized deductions subject to the 2% floor of adjusted gross income (AGI), which are no longer deductible on the federal tax return.  

While the IRS has eliminated the moving expense deduction (with exceptions for members of the armed services), certain states may still allow the deduction.  These states include New York, New Jersey, California, Massachusetts, Arizona, Arkansas, Hawaii, Indiana, Iowa, Kentucky, Maine, Minnesota, Mississippi, North Carolina, Pennsylvania, South Carolina, Vermont, and Virginia

State Taxes and Americans Who Move Abroad

In you have permanently moved out of state, you will generally file a part year resident state tax return (ending your residency).  However, if your resident state was California, New Mexico, South Carolina or Virginia, you may have some difficulty with the state tax authorities.  This could come in the form of a notice revising your tax return to a resident return.  It is almost guaranteed that you'll get such a notice in California if you continue to use a California address on your tax return (such as your parents' address).  You may have to prove that you have left permanently and do not intend to return to the state.

Some of my clients continue to use a U.S. address on their tax return after they have moved outside the U.S. because they are changing locations frequently or mail service is not reliable.  In such case, it is best to use an address from a state that doesn't have a personal income tax, if possible.

State Residency Rules

New York Residency Rules