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is, or where he or she intends to return
upon separation. For purposes of this ar-
ticle, the term “domicile” refers to legal
residence; some states also define it as
permanent residence. Residence refers to
physical presence in the state. Foreign
Service personnel must continue to pay
taxes to the state of domicile (or to the
District of Columbia) while residing out-
side of the state, including during assign-
ments abroad, unless the state of resi-
dence does not require it. Members are
encouraged to review the Overseas Brief-
ing Center’s guide to Residence and
Domicile, available onAFSA’sWeb site at
www.afsa.org/MemberServices/Member-
Guidance/ResidenceandDomicile.aspx
A non-resident, according to most
states’ definitions, is an individual who
earns income sourcedwithin the specific
state but does not live there or is living
there for only part of the year (usually
fewer than six months). Individuals are
generally considered residents, and are
thus fully liable for taxes, if they are
domiciled in the state or if they are living
in the state (usually at least six months
of the year) but are not domiciled there.
Foreign Service employees residing in
themetropolitanWashington,D.C., area
are required to pay income tax to the
District of Columbia, Maryland or Vir-
ginia, in addition to paying tax to the
state of their domicile. Most states allow
a credit, however, so that the taxpayer
pays the higher tax rate of the two states,
with each state receiving a share. There
are currently seven states with no state
income tax: Alaska, Florida, Nevada,
South Dakota, Texas, Washington and
Wyoming. In addition,NewHampshire
and Tennessee have no tax on personal
income but do tax profits from the sale
of bonds and property.
There are 10 states that, under certain
conditions, do not tax income earned
while the taxpayer is outside the state:
California, Connecticut, Idaho, Min-
nesota, Missouri, New Jersey, NewYork,
Oregon, Pennsylvania andWestVirginia.
The requirements for all except Califor-
nia, Idaho, Minnesota and Oregon are
that the individual not have a permanent
“place of abode” in the state, have a per-
manent “place of abode” outside the
state, and not be physically present for
more than 30 days during the tax year.
California allows up to 45 days in the
state during a tax year. These 10 states
require the filing of non-resident returns
for all income earned from in-state
sources.
Foreign Service employees should
also keep inmind that states could chal-
lenge the status of government housing
in the future.
The following list gives a state-by-state
state overview of the latest information
available on tax liability, with addresses
provided to get further information or
tax forms. Tax rates are provided where
possible. For further information, please
F E B R U A R Y 2 0 1 2 / F O R E I G N S E R V I C E J O U R N A L
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