The Foreign Service Journal, February 2012

A F S A N E W S 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 37