Do expats from West Virginia still need to pay state taxes?
Ever wonder if you owe taxes to West Virginia after moving abroad?
It's not as simple as just leaving. In the US, there are two key terms for where you live: residency and domicile. Residency is just your current address, but domicile is like your permanent home, the place you always return to.
This article will explain West Virginia's tax rules for expats and show you some ways to save money on your taxes.
TLDR:
- You spend less than 30 days a year in West Virginia
AND
- You don't have a permanent home there (established address)
Yes, you likely WILL owe West Virginia taxes if:
- You spend more than 30 days in West Virginia with the intent to make it your permanent home
OR
- You're physically present in West Virginia for more than 183 days a year (most of the year)
Understanding West Virginia's tax residency rules
Now that we know residency and domicile are key for West Virginia taxes, let's break down what they mean for expats.
Resident vs. Domicile:
Resident:
Think of this as your current address. In West Virginia's eyes, you're a resident, according to t if you spend more than 30 days in the state with the intent of making it your permanent home.
OR
If you maintain a physical presence in the state for more than 183 days of the taxable year (that's most of the year).
Domicile:
This is your long-term home, the place you consider your true base, even if you're away for a while.
Resident Status and Taxes
If you're a West Virginia resident, you'll owe taxes on all your income, no matter where you earn it. They use your federal adjusted gross income (AGI) to figure out how much you owe.
Nonresident Status and Taxes
Here's the good news for expats! If you're a nonresident, you generally only owe taxes on the income you earn within West Virginia. So, if you have a job there or rent out a property, that income gets taxed by West Virginia. But any income from elsewhere (like your new job abroad) wouldn't be taxed by West Virginia.
Part-Year Resident
This might apply if you moved in the middle of the year. In that case, you might be considered a part-year resident and would only owe taxes based on the portion of the year you spent in West Virginia.
What constitutes West Virginia-sourced income?
Understanding what constitutes West Virginia-sourced income is essential for nonresidents and part-year residents to accurately determine your tax obligations.
West Virginia-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 West Virginia.
- Business Income: Income from business activities conducted in West Virginia.
- Real Estate: Rental income from property located in West Virginia.
- Capital Gains: Profits from the sale of real estate or tangible property in West Virginia.
- Dividends and Interest: Dividends from West Virginia-based companies and interest earned from West Virginia financial institutions.
- Pensions and Retirement Plans: Retirement income from West Virginia 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
West Virginia imposes an estate tax on the transfer of the taxable estate of every decedent who was a resident of West Virginia at the time of death. Moving your domicile to a state without an estate tax, such as Florida or Texas, can significantly reduce the tax burden on your estate, ensuring more wealth is transferred to your heirs. This is particularly beneficial for individuals with substantial assets, as West Virginia’s estate tax can significantly impact the value of the estate passed on to beneficiary.
Tax benefits and exemptions for expats from West Virginia
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 abroad to exclude a certain amount of their foreign-earned income 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.
Foreign Tax Credit (FTC)
The FTC helps you avoid double taxation by allowing you to take a credit for foreign taxes paid on income that is also subject to U.S. federal tax.
This credit can reduce your U.S. tax liability significantly, especially if you reside in a country with high tax rates.
Foreign Housing Exclusion (FHE)
The Foreign Housing Exclusion (FHE) allows you to deduct certain housing expenses from your federal and state taxable income. Qualifying expenses include rent, utilities (excluding telephone), and other reasonable costs related to housing abroad.
The amount you can exclude is limited to a base amount plus housing expenses exceeding 16% of the FEIE limit.