Do digital nomads pay state taxes?

For U.S. citizens living abroad, understanding your tax obligations goes beyond just federal income taxes. While the federal government taxes your worldwide income, state taxes can add another layer of complexity—especially since digital nomads pay state taxes depending on their state of residency and ties.

Even if you qualify for the Foreign Earned Income Exclusion to reduce your federal tax liability, this benefit doesn’t always apply to state taxes. Each state has its own tax laws and residency rules, so it’s crucial to know whether you still need to pay state tax while living abroad. Failing to address your state tax obligations can lead to double taxation and unexpected tax bills.

Do digital nomads pay state taxes?

Most of the time.

If you’re still a resident/domiciliary of a taxing state, expect worldwide income to be taxed. As a US citizen, you are also subject to US tax on your worldwide income, regardless of where you live.

Digital nomads need to know that both state and federal tax obligations apply, and even if you are not subject to state taxes, you may still need to pay US taxes and file returns as a US citizen, no matter your residency status.

If you’re a nonresident, you’re generally taxed only on income sourced to that state (e.g., rent from property located there).

What decides whether a state can tax me?

Domicile/residency: Your permanent legal home. States use this to determine if you’re a resident for tax purposes. Residents are taxed on worldwide income. Your residency status affects your filing requirements for both state and federal tax returns. Residents are generally required to file a federal tax return in addition to any state returns.

Statutory residency (some states): e.g., New York treats you as a resident if you keep a permanent place of abode and spend ≥184/183 days there—even if your domicile is elsewhere. Maintaining tax ties can result in resident treatment.

Which states tax digital nomads?

• States that will tax people living abroad if they haven’t switched domicile (the “sticky” income-tax states): Alabama, Arizona, Arkansas, California, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Utah, Vermont, Wisconsin.
• States where you can claim non-residency:All other income-taxing states generally tax only in-state-source income once you’ve clearly severed ties and established domicile elsewhere.

Which states do not tax digital nomads?

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, New Hampshire (NH fully repealed its interest & dividends tax effective Jan 1, 2025).

Establishing residency in one of these states can help digital nomads avoid a state tax bill, as these states do not impose state income tax.

Note: Washington still has a capital-gains excise tax despite no wage income tax.

Do states tax personal worldwide income or just “digital nomads”?

States tax people, not labels. Residents are taxed on all taxable income, including foreign income; nonresidents are taxed only on in-state-source income. (Note: South Carolina’s base is unusual in how it treats certain business vs. personal service income.) In addition to state taxes, some areas also impose a local tax, which digital nomads should consider when determining their overall tax obligations.

How do I change domicile away from a taxing state?

Three steps: abandon the old, establish the new, prove intent.

• Close out housing/lease, utilities, in-state benefits; surrender your old driver’s license.
• Address any rentals in the old state (keeping one can create tax ties).
• Obtain a new driver’s license/ID (Florida recommended), register to vote, update vehicle registration/insurance, and use the new address everywhere (banks, payroll, IRS, insurance, estate docs).
• Keep day counts low in the old state (e.g., CA’s >9-month presumption; NY’s statutory test).

When moving abroad, digital nomads should also consider the tax residency rules and obligations in their host country, as local laws may affect their overall tax responsibilities.

Is establishing residency in Florida the cleanest path?

Yes. Florida has no personal income tax and no minimum stay rules. Typical evidence: Declaration of Domicile (Fla. Stat. §222.17), FL driver’s license/ID, voter registration, vehicle/insurance moved, and consistent use of a Florida residential address for banking, IRS, employment, and estate documents. If you own a home, consider Homestead (separate rules).

What if I work remotely for a New York or New Jersey employer while living abroad?

Beware convenience-of-the-employer rules. NY can source your wages to NY if you’re remote for your convenience (not employer necessity). NJ adopted a reciprocal version in 2023 when the other state uses one (e.g., NY/DE/NE). Document employer necessity to reduce double-tax risk.

Remote workers should also be aware that state-specific sourcing rules may impact their tax obligations, even if they are working from abroad.

If I become a nonresident, do I still owe state taxes on anything?

Usually yes—on income earned from state sources only: rent from property in the state, apportioned business income, or wages physically worked there (subject to special telework rules). File a nonresident return when applicable. If you missed prior years, address them promptly to limit penalties/interest.

Can cities tax me, too?

Yes. New York City taxes city residents. Philadelphia taxes wages—residents and nonresidents for work performed in the city—with its own sourcing rules.

Nomads have to pay city taxes if they meet the residency or work requirements of certain cities.

How to file state taxes as a digital nomad?

1. Determine your state residency (domicile vs. nonresident).
2. Identify state-source income (if nonresident).
3. File required resident/nonresident returns.

Digital nomads are required to file an income tax return in each state where they have a filing obligation.

Keep thorough records: addresses, IDs, day counts, travel, and where work was physically performed.

Do I need to file multiple state tax returns?

Possibly—if you earned income sourced to more than one state or changed residency mid-year. Track time, income, and ties to allocate correctly and avoid double tax.

Your filing requirements may also change if your residency or income sources change during the tax year.

What’s the simplest path to zero state income tax as a digital nomad?

• Sever ties with your former taxing state.
• Plant your flag in Florida (Declaration of Domicile, IDs, voter reg, vehicle/insurance, banking moved).
• Live the fact pattern: low day counts in prior states; no permanent abode there; document travel.
• Watch exceptions: WA capital-gains tax; NY/NJ convenience rules.

Careful digital nomad tax planning can help minimize or eliminate state income tax obligations.

Do I still file federal taxes as a digital nomad?

Yes. Americans living abroad must file a federal return on worldwide income. Digital nomads must file Form 1040 as part of their federal tax return.

If you are a digital nomad with foreign bank accounts or foreign financial assets, you may be required to file a Foreign Bank Account Report (FBAR) using FinCEN Form 114 and disclose your foreign financial accounts and assets if they exceed certain thresholds. Bank accounts held abroad must be reported if the aggregate value of all foreign bank accounts exceeds $10,000 at any point during the calendar year. This includes reporting requirements for foreign financial assets under FATCA, such as Form 8938.

You may reduce federal tax via FEIE and/or the Foreign Tax Credit, but states don’t have to follow those federal benefits—confirm your state’s treatment before relying on them. Self employed digital nomads must also report their business income and expenses on their federal tax return.

To qualify for the FEIE, digital nomads must meet either the bona fide residence test or the physical presence test during the calendar year.

Digital nomads may also be eligible for the foreign housing exclusion or housing exclusion if their housing expenses exceed certain limits. Qualified housing expenses, such as rent and utilities, can be claimed on IRS Form 2555 to reduce taxable income. The foreign housing exclusion is especially beneficial for those living in high-cost cities abroad.