Do expats from Missouri still need to pay state taxes?

Have you moved out of Missouri and now live abroad? You might be wondering if you still owe taxes to Missouri. 

In the United States, most states, including Missouri, have an income tax. 

But what happens to this tax obligation if you move away?

TLDR:

Understanding Missouri's tax residency rules

Missouri uses both domicile (your permanent home) and your physical presence to decide who counts as a resident for income-tax purposes. By default, if Missouri is your domicile, you are a Missouri resident and the state can tax your worldwide income until your domicile changes or you qualify for a narrow nonresident exception.

Full-Year Resident

You’re considered a full-year resident if Missouri is your home (domicile) for the entire tax year (January 1 to December 31). As a full-year resident, you file a Missouri resident return and Missouri can tax all of your income, regardless of where it was earned (including foreign wages, business income, and investment income).

Part-Year Resident

You’re a part-year resident if you moved into or out of Missouri during the year and changed your domicile. In that case, you generally:

• Pay Missouri tax on all income you received while you were a Missouri resident, and
• Pay Missouri tax on Missouri-source income for the part of the year when you were not a resident.

Non-Resident with Missouri Domicile

Missouri has a narrow rule under which someone who is domiciled in Missouri can still be treated as a nonresident for a particular tax year if they meet all of the following conditions:

1. You do not maintain a permanent place of abode in Missouri during the year.
2. You do maintain a permanent place of abode outside Missouri.
3. You spend no more than 30 days in Missouri during the tax year.

If you are domiciled in Missouri and meet all three conditions, Missouri treats you as a nonresident for that year and generally taxes only your Missouri-source income.

If you are domiciled in Missouri and do not meet all of these conditions, you are treated as a resident and Missouri can tax your worldwide income, even if you live and work abroad.

Non-Resident without Missouri Domicile

If you are not domiciled in Missouri and did not live in Missouri during the year, you’re a nonresident without Missouri domicile. In that case, you generally won’t owe Missouri tax on income earned outside the state.

However, if you have Missouri-source income, for example:

• Wages for work performed in Missouri
• Business income from activities carried on in Missouri
• Rental income from Missouri property
• Gains from selling Missouri real estate or tangible property in Missouri

then you may still need to file a Missouri nonresident tax return and pay Missouri tax on that Missouri-source income.

What constitutes Missouri-sourced income?

Understanding what constitutes Missouri-sourced income is essential for nonresidents and part-year residents to accurately determine your tax obligations.

Missouri-sourced income refers to any income derived from activities or assets located within the state. 

Here are some key categories to consider:

• Wages and Salaries: Money earned for services performed in Missouri.
• Business Income: Income from business activities conducted in Missouri.
• Real Estate: Rental income from property located in Missouri.
• Capital Gains: Profits from the sale of real estate or tangible property in Missouri.
• Dividends and Interest: Dividends from Missouri-based companies and interest earned from Missouri financial institutions.
• Pensions and Retirement Plans: Retirement income from Missouri institutions or for services performed in the state.

Why should you move domicile to a state with zero state income tax?

Avoidance of estate tax

Missouri currently does not impose a separate state-level estate or inheritance tax; for most Missourians, any estate tax exposure comes only from the federal estate tax if the estate exceeds the federal exemption amount. Moving your domicile to a state with no estate or inheritance tax, such as Florida or Texas, therefore doesn’t change your Missouri estate-tax exposure, but it can matter if you are choosing between states that do levy these taxes.

More importantly, relocating from Missouri to a state with zero state income tax can help reduce the overall state-tax drag on your lifetime earnings and on what you are ultimately able to pass on to your heirs. 

Tax benefits and exemptions for expats from Missouri

Living abroad as an expat comes with various tax benefits and exemptions that can help reduce your overall tax burden.

Here are some of the key tax advantages available:

Foreign Earned Income Exclusion (FEIE)

The Foreign Earned Income Exclusion (FEIE) allows U.S. taxpayers residing overseas to exclude a specific amount of their income earned in foreign countries from U.S. federal income tax.

For the tax year 2024, this exclusion amount is up to $126,500.

To qualify, you must pass either:

• Bona Fide Residency Test: You qualify if you are a resident of a foreign country for an uninterrupted period that includes an entire tax year.
• Physical Presence Test: You qualify if you are physically present in a foreign country for at least 330 full days during a 12-month period.

FEIE Guide

Foreign Tax Credit (FTC)

The FTC helps individuals avoid double taxation by allowing them to claim a credit for foreign taxes paid on income that is also subject to U.S. federal tax.

This credit can significantly reduce your U.S. tax liability, especially if you live in a country with high tax rates.

FTC Guide

Foreign Housing Exclusion (FHE)

The FHE allows you to exclude certain housing expenses from your U.S. federal taxable income, including rent, utilities (excluding telephone), and other reasonable expenses related to housing abroad. Some states follow federal rules closely, while others do not, so always check how your state treats these exclusions or speak with a qualified tax professional.

The amount you can exclude is limited to a base amount plus housing expenses exceeding 16% of the FEIE limit.

FHE Guide