State Tax Residency When You Move to Germany: Which States Keep Taxing You

You have registered your address in Berlin, received your Steuer-ID, and paid German income tax through your payslip for a full year. Then a letter arrives from California, or Virginia, or New York, asking why you have not filed a state return. It feels absurd: you live in Germany now. But many Americans discover that moving abroad does not automatically end their US state tax residency, and a few states are notoriously reluctant to let go. This guide explains which states keep taxing you after a move to Germany, why, and how to cut the tie properly.

I moved to Germany from a state that turned out to be one of the stickier ones, and I spent most of my first spring abroad untangling it. The rules are not intuitive, the federal rules do not help, and the US-Germany tax treaty barely applies to states at all. Here is what I wish I had known before I packed.

Why Your US State Can Still Tax You From Germany

Most Americans abroad know that the federal government taxes citizens wherever they live. Fewer realise that states operate under their own, separate rules, and those rules are based on residency and domicile rather than citizenship.

Federal Versus State Taxation

At the federal level, US citizens and green card holders file a return every year regardless of where they live. To prevent double taxation with Germany, you use either the Foreign Earned Income Exclusion or the Foreign Tax Credit, and usually the credit works best because German tax rates are high. If you are weighing the two, FEIE vs Foreign Tax Credit in Germany: Which Saves Americans More goes through the trade-offs.

States are different. A state cannot tax you merely for being a US citizen. It taxes you if you are a resident of that state under its own definition, and for most states, that definition starts with domicile.

Domicile: The Concept That Causes the Trouble

Your domicile is your permanent home: the place you intend to return to and treat as your true base, even if you live elsewhere for years. You can have many residences, but only one domicile at a time. And crucially, you keep your old domicile until you establish a new one.

That last point is the trap. When you move from Ohio to Texas, you establish a new domicile in Texas, and Ohio’s claim ends. When you move from Ohio to Munich, many states take the view that you have not established a new domicile in another US state, and some will argue you have not truly abandoned your old one either, particularly if you plan to return, keep a house, or maintain other ties.

Why the Tax Treaty Does Not Save You

The US-Germany income tax treaty helps you avoid double taxation at the federal level, but US income tax treaties generally do not bind individual states. A state can tax your German salary as a resident’s worldwide income without any treaty relief. The treaty itself is explained in The US-Germany Tax Treaty: How Americans Avoid Being Taxed Twice.

On top of that, most states only give credits for income taxes paid to other US states, not to foreign countries. So if your state still treats you as a resident, you may owe state tax on income that Germany has already taxed at a higher rate, with no credit for the German tax.

The Cost of Getting It Wrong

Consider a hypothetical engineer earning the equivalent of 90,000 dollars in Germany. At the federal level, the foreign tax credit for German income tax usually wipes out any US federal liability on that salary. If her old state treats her as a resident, gives no credit for German tax and has a state income tax rate averaging, say, 6 percent on that income, she could owe around 5,400 dollars in state tax each year, plus interest and penalties if she does not file. Over three years abroad, that becomes more than 16,000 dollars for nothing more than failing to cut ties.

States also have long memories. Many do not start the clock on their assessment period if you never filed a return for a year, so a state can, in principle, look back much further than you might expect. The longer the problem sits unaddressed, the more interest accumulates, and the harder it becomes to reconstruct the evidence you would need to show you had left.

This is where specialist help pays for itself. Taxes for Expats is a firm that focuses specifically on Americans living abroad, and state residency questions are part of the territory its preparers deal with regularly. When I first got that state letter, having someone who understood both the federal foreign tax credit and the state domicile rules was worth far more than any software.

The Sticky States and the Easy Ones

States fall broadly into three groups when you move abroad: states with no income tax, states that generally let you go once you leave, and states that tend to hold on.

States With No Broad Income Tax on Wages

If your last US domicile was in one of these states, state income tax is usually not an issue:

State	Income tax position for individuals
Alaska	No state income tax
Florida	No state income tax
Nevada	No state income tax
South Dakota	No state income tax
Tennessee	No tax on wages
Texas	No state income tax
Washington	No tax on wages; a separate tax on certain large capital gains
Wyoming	No state income tax
New Hampshire	No tax on wages

Many long-term expats establish domicile in one of these states before moving abroad, for example by living there for a period, getting a driver’s licence and registering to vote there. This needs to be genuine, and it is not a paperwork exercise you can complete in an afternoon, but it can be legitimate and effective.

States Known for Holding On

A handful of states have a reputation among expat tax preparers for being difficult to leave. The details of each state’s rules change over time, so treat this as a map of where to be careful rather than a complete legal statement.

State	Why it is considered sticky	Notable feature
California	Residency is based on domicile plus purpose of presence; the state looks hard at ties you keep	Does not follow the federal foreign earned income exclusion and generally gives no credit for foreign taxes; has a safe harbour for long employment-related absences
Virginia	Domicile-based; requires clear evidence of abandoning Virginia domicile	Often pursues people who keep a home, car or voter registration in the state
New Mexico	Domicile-based with a strong presumption of continued domicile	Former residents may be asked to prove they left permanently
South Carolina	Domicile-based, with a focus on intent to return	Keeping property and ties can be enough to stay resident
New York	Domicile rules plus a statutory residence test	Has a special rule that can treat domiciliaries abroad as non-residents if they meet strict presence conditions
Massachusetts	Domicile-based	Ties such as property and licences are weighed carefully

If you are domiciled in one of these states, you need a deliberate plan to end your residency, and you should expect to document it.

Virginia, New Mexico and South Carolina in Practice

These three states rarely make headlines, but expat preparers see them again and again. The common thread is that each puts the burden on you to show that you abandoned your domicile, and each will look at what you left behind.

In Virginia, people who move abroad while keeping a house in Northern Virginia, a car registered there and a Virginia driver’s licence are classic examples of former residents who receive questions years later. Government contractors and military-adjacent families, who often plan to come back, are especially exposed, because their intent to return is written into their employment arrangements.

New Mexico and South Carolina work in a similar way. If you kept your home, your licence and your voter registration and told your employer you would be back in three years, you should assume the state may still regard you as domiciled there. The fix is the same in each case: decide, cut ties, file a final part-year return and keep the evidence.

California in More Detail

California deserves its own section because it combines three features that make it particularly expensive for Americans in Germany.

First, it decides residency based on domicile and on whether you are in or out of the state for a temporary or transitory purpose. An assignment to Germany that is expected to last two years with a return planned afterwards can look temporary.

Second, California does not conform to the federal foreign earned income exclusion. Even if you excluded your German salary federally, California may add it back.

Third, California generally gives credits only for taxes paid to other US states, so German income tax does not reduce your California bill.

There is a safe harbour. A California domiciliary who is outside the state under an employment-related contract for an uninterrupted period of at least 546 consecutive days is generally treated as a non-resident, subject to conditions: limited return visits to California during the period, a cap on intangible income such as investment income, and no tax avoidance purpose. The safe harbour can also extend to an accompanying spouse. It is valuable for people relocating for work, but it does not help retirees or remote workers without an employment contract abroad, and the conditions need to be checked carefully.

New York’s Special Rule

New York also uses domicile, and changing your New York domicile requires showing a genuine move of your life elsewhere. However, New York has a rule sometimes called the 548-day rule: a New York domiciliary can be treated as a non-resident if they are present in a foreign country for at least 450 days during any period of 548 consecutive days, spend only limited time in New York during that period, and meet other conditions. For people on fixed-term assignments to Germany, this can be a useful route, but it requires careful day counting.

How to Break State Tax Residency Before and After the Move

Ending state residency is about demonstrating, with evidence, that your permanent home is no longer in that state. The more ties you cut, the stronger your position.

Ties That States Look At

States generally consider a mix of the following when deciding whether you remain domiciled:

1. Home: whether you still own or rent a home in the state, and whether it is kept available for your use.
2. Family: where your spouse and children live.
3. Driver’s licence and vehicle registration: whether you still hold a state licence and keep cars registered there.
4. Voter registration: where you are registered to vote, including as an overseas voter.
5. Bank and investment accounts: the address on your accounts.
6. Professional licences and memberships: club memberships, professional licences and religious affiliations in the state.
7. Business interests: whether you own or operate a business in the state.
8. Intent and statements: what you have said on forms, in employment documents and on social media about returning.
9. Time spent: how often and how long you return.

No single factor is decisive, but each tie you keep is a piece of evidence the state can use.

Step-by-Step Plan for Leaving Your State

1. Decide your future domicile. If you will not return to the state, say so in your planning documents and act consistently with it.
2. File a part-year resident return for the year you leave, showing the date your residency ended.
3. Sell or rent out your home on a long-term lease, rather than keeping it empty and available to you.
4. Surrender or let lapse your state driver’s licence where possible, and get a German licence in due course.
5. Update your voter registration. Overseas voters vote in their last US state of residence, and in many states this alone does not make you a tax resident, but check your state’s position.
6. Change the address on bank, brokerage and retirement accounts to your German address, or to a neutral address.
7. Move your belongings. Leaving your possessions stored in the state suggests you plan to return.
8. Register in Germany. Your Anmeldung shows you have a new permanent home. See How to Register Your Address (Anmeldung) in Germany.
9. Keep a file of evidence: your German lease, Anmeldung certificate, employment contract and proof of ties cut in the US.

The Year You Move

The year you move is the most complex. You are a part-year resident of your old state, a resident of Germany for part of the year, and possibly a dual-status taxpayer at the federal level in some situations. Income earned before the move is taxable by the state; income earned after you validly ceased to be a resident usually is not, unless it comes from sources in that state, such as rental income from property you kept there. The federal side of this transition year is explained in Dual-Status Tax Year: Filing the Year You Move To or Leave Germany.

Income That Stays Taxable Even After You Leave

Even after you successfully end state residency, a state can still tax income sourced within it. Typical examples:

Income type	Taxable by your old state after you leave?
Salary from your German employer for work done in Germany	Generally no, once residency has ended
Rental income from a house you kept in the state	Yes, usually as non-resident income
Gain on selling property in the state	Yes, usually
Business income from a business operating in the state	Yes, for the in-state portion
Interest, dividends and capital gains on investments	Generally no for a non-resident
Pension and retirement distributions	Depends on the state and the type; federal law limits how states tax some retirement income of former residents

If you rent out your former home, you will typically file a non-resident state return every year for that income. Tax Implications of Renting Out Your Property Back Home while Living in Germany covers the German side of that arrangement.

If You Already Moved Without Cutting Ties

Many people read articles like this one after they have already moved. If that is you, do not panic, but do not ignore it either.

Start by reconstructing the facts: when you left, what you kept, where you were registered to vote, and how often you went back. Then work out whether your old state would likely treat you as resident for each year since the move. If the answer is yes, or probably, you may need to file returns for those years, possibly claiming whatever credits or exclusions the state allows. If the answer is no, keep a written record of why, in case the state asks later.

The federal side often needs attention at the same time. People who missed state returns frequently missed federal ones too, or skipped the FBAR for their German bank accounts. The federal catch-up route is explained in Streamlined Filing Procedures: Catching Up on Missed US Returns From Germany, and the account reporting rules in FBAR for German Bank Accounts: Who Must File and How. A preparer who handles both sides, such as Taxes for Expats, can bring federal and state filings up to date in a single, consistent package rather than piecemeal.

Three Scenarios: How State Residency Plays Out

Rules only become real when you apply them to a life. Here are three composite scenarios based on the kinds of situations expat preparers see every filing season. The numbers are illustrative.

The Assignee From San Jose

Daniel works for a software company in San Jose and accepts a two-year assignment to its Munich office. He rents out his condominium on a long-term lease, keeps his California driver’s licence, and plans to return when the assignment ends.

Because his absence is under an employment contract and is expected to last more than 546 consecutive days, Daniel may qualify for California’s safe harbour, as long as he keeps his visits back to California within the permitted limit and his investment income stays below the threshold. If he qualifies, California treats him as a non-resident for the period, and his German salary falls outside California tax. His rental income from the condominium, however, remains California-source income, so he files a non-resident California return each year for that.

If the assignment is cut short at 15 months, Daniel no longer meets the 546-day test, and California may treat him as a resident for the whole period. That single fact could mean a California tax bill on his entire Munich salary, with no credit for the German tax he paid. Planning for that possibility, and keeping careful records of his days, is essential.

The Retiree From Virginia

Margaret retires from a federal job in Virginia and moves to Freiburg to be near her daughter. She sells her house, moves her furniture, gets a German residence permit and registers her address. But she keeps her Virginia driver’s licence “just in case”, leaves her bank accounts with a Virginia address belonging to her son, and stays registered to vote in her old county.

Each of those ties is small, but together they give Virginia an argument that she never truly left. Margaret’s simplest move is to tidy up: let the licence lapse when she gets a German one, change the bank addresses to Freiburg, and file a part-year resident return for the year she moved showing the date she left. She keeps her overseas voter registration, which in Virginia generally does not by itself make her a resident, but she checks that point with her preparer.

Her federal pension and Social Security also have their own rules on taxation by states and under the treaty, which is why she asks a preparer such as Taxes for Expats to look at the whole picture rather than just one return.

The Remote Worker From Texas

Priya worked remotely from Austin for a New York-based company and now works remotely from Leipzig for the same employer. Texas has no state income tax, so her old state is not a problem. But her employer is in New York, and her payroll department continues to withhold New York tax as if she were working there.

Because Priya is not domiciled in New York and does not work there physically, she generally should not owe New York tax on wages for work performed in Germany, but she needs to fix the withholding and may need to file a New York non-resident return to recover what was withheld. If she starts flying to the New York office for a few days each quarter, the picture becomes more complicated, because New York has a so-called convenience of the employer rule for non-residents who split their working days. It is a reminder that the state that taxes you is not always the one you lived in.

Germany’s Own State Question: Bundesländer and Church Tax

Americans sometimes ask whether German states, the Bundesländer, work like US states for tax. The short answer is no, but there is one exception worth knowing.

German Income Tax Is Federal

Income tax in Germany is set at the federal level. You pay the same income tax rates whether you live in Bavaria, Berlin or Saxony, and you file one return with the Finanzamt responsible for your address. There is no equivalent of a separate state income tax return. For an overview of how it works, see Understanding Taxes in Germany: An Expat’s Guide to the German Tax System.

The solidarity surcharge, the Solidaritätszuschlag, is also federal and now applies only to higher incomes for most taxpayers.

Church Tax Varies by State

The one tax that does vary by state is church tax, Kirchensteuer, charged to registered members of recognised religious communities. It is a percentage of your income tax: 8 percent in Bavaria and Baden-Württemberg, and 9 percent in the other states. If you register as a member of a church when you complete your Anmeldung, it will be deducted through payroll. Whether you can claim it as a credit on your US return is a separate question, discussed in Is Church Tax Creditable on a US Return? The Kirchensteuer Question.

Moving Between German States

If you move from Munich to Hamburg, you simply re-register your address and your tax file moves to the new Finanzamt. The only change you are likely to notice in your tax bill is the church tax rate if you are a member. This simplicity is a pleasant contrast to the US system.

Getting Professional Help With State and Federal Filing

State residency is one of the areas where expat tax software and generalist preparers most often fall short. The rules are state-specific, fact-driven and interact with your federal foreign tax credit.

When You Should Get Help

Consider professional help if:

• Your last US domicile was in California, Virginia, New Mexico, South Carolina, New York or Massachusetts.
• You kept a home, business or significant ties in your old state.
• You have received a letter or notice from a state tax authority.
• You are on a fixed-term assignment and plan to return.
• You have not filed state returns since moving and are unsure whether you should have.

What Taxes for Expats Brings to the Table

Taxes for Expats prepares US federal and state returns for Americans living abroad, including those in Germany. For this specific problem, the value lies in three areas:

1. Assessing your state status. A preparer who works with expat files every day can review your ties and tell you whether your old state is likely to treat you as resident, part-year resident or non-resident.
2. Coordinating federal and state returns. Choosing between the foreign tax credit and the foreign earned income exclusion can affect your state return, especially in California. Getting both returns right together avoids nasty surprises.
3. Dealing with back filings and notices. If you have missed state returns, a preparer can help you assess what is owed and how to bring things up to date.

Check the Taxes for Expats website for its current services, how its pricing is structured and how to start, as these change over time. When I compared options, I found it useful to book an initial consultation with my questions written down in advance: my old state, the ties I still had, my German income and my plans to return.

Documents to Gather Before Your Consultation

Whoever you work with, you will save time and fees by arriving prepared. Gather these before your first call:

1. Your last two years of federal and state returns, filed before the move.
2. The date you left the state and the date you registered your address in Germany, with your Anmeldung certificate.
3. Your German employment contract or assignment letter, including its expected duration.
4. A list of ties you still hold: property, vehicles, licences, voter registration, accounts and memberships.
5. A calendar of days spent in the US, and in your old state, since the move.
6. Your German payslips and your annual German wage tax statement, the Lohnsteuerbescheinigung.
7. Any letters or notices you have received from a state tax authority.

With these in hand, a preparer can usually give you a clear view of your state position in a single session.

Questions to Ask Any Expat Tax Preparer

Whichever firm you choose, these questions will reveal whether they understand state residency:

1. How does my last state of domicile treat residents who move abroad?
2. Which of my remaining ties would the state consider most significant?
3. Do I need to file a part-year or non-resident return, and for which years?
4. How does my choice of foreign tax credit or exclusion affect my state return?
5. Do I qualify for any safe harbour or special rule, such as California’s or New York’s?
6. What documents should I keep to prove I ended residency?

Your Next Step

Do not wait for the letter. If you are planning a move to Germany, or have moved recently and are unsure where you stand, make a list of every tie you still have to your old state and decide which ones to cut. Then speak to a specialist. Taxes for Expats is a strong place to start for Americans in Germany who want their federal and state returns handled together by people who do this every day. A single conversation now can save years of state tax on income that Germany has already taxed.

Disclaimer

This article is for general informational purposes only and does not constitute professional advice. Laws, prices and regulations vary by location and change over time. Consult a qualified professional for guidance on your specific situation.