California Safe Harbor Rule California is one of the toughest states when it comes to taxes for Americans abroad. Not only do you have to file and pay state tax on your income. California does not allow for the Foreign Earned Income Exclusion (FEIE).

Do I need to file a state return if I live overseas?

Unlike almost everywhere else in the world, American expats still need to file U.S. income taxes while living abroad—and that also may include state taxes. The fact is, if you remain a U.S. citizen or green card holder who works abroad, you are still required to file U.S. taxes and report your income every year.

Does CA have a foreign tax credit?

Essentially, California does not allow a foreign tax credit, or a foreign earned income exclusion, for income earned abroad, unless you fall under the “safe harbor” exclusion (explained below).

Do you have to file a California state tax return if you are abroad?

If you’re an American living abroad who came from California, you may not know whether your former state still considers you a resident. If that’s the case, you may need to file a state tax return along with your expatriate tax return.

Do you have to pay US income tax if you live abroad?

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

How are you taxed as a resident of California?

In California, as in most states, residents are taxed on all income no matter where it was earned or where the property is located. Have questions about state taxation? Connect with one of our expert accountants today when you start your taxes.

Do you still have to file taxes if you leave California?

However, even if you expect not to owe taxes, you should still comply with the filing requirements and file the California tax return. For those leaving California under employment-related contracts, it is possible to break tax residency even if you are still considered domiciled in California (that is, your permanent home is in California).