Guide
US state tax returns
States are not bound by the US–UK treaty, set their own residency tests, and are frequently where the real exposure sits.
The treaty stops at the state line.
Federal treaty relief does not bind the states. Several disregard it entirely, so income sheltered federally can still be fully taxable at state level.
States also run their own residency tests, and some are markedly reluctant to accept that you have left.
At a glance
- Treaty
- Does not bind states; several ignore it completely
- Residency
- Each state sets its own test, often based on domicile plus day count
- Difficult states
- California and New York are the usual problems for departing residents
- No income tax
- A number of states levy none at all
- Part-year
- Arrival and departure years typically need a part-year return
In detail
01
Breaking residency
Leaving the country does not automatically end state residency. Domicile, property, licences, voter registration and family ties all feed the analysis.
02
California specifically
It applies a safe-harbour rule for some absences and otherwise looks closely at intent. It does not follow federal treaty positions, which catches many people moving to the UK.
03
Source income after leaving
Rent from property in the state, or income from work performed there, generally remains taxable by that state whatever your residency.
04
Credits between states
States give credit for tax paid to other states, but rarely for foreign tax — so a UK move can produce a charge with no relief.
States are not bound by the US–UK treaty, set their own residency tests, and are frequently where the real exposure sits.
Frequently asked
I moved to London from New York. Do I still file in New York?
Possibly, at least for a part-year return, and longer if your domicile did not change. New York examines departures closely.
Does the treaty help at all with state tax?
Generally not. That is the single most important thing to understand about state tax in a cross-border move.
Which states are simplest to leave?
Those with no income tax, since there is nothing to break residency from. Elsewhere it depends on how the state defines domicile.
This guide is general information, not advice for your circumstances. Cross-border tax turns on detail, and the right answer for someone with a similar situation may not be the right answer for you. Talk to us before acting on anything here.
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