Why Florida Residency Matters for US Expats
As an American living abroad, you face a unique tax situation that citizens of most other countries never encounter: the United States taxes its citizens on worldwide income regardless of where they live. This means that even if you've lived in London for a decade or built a business in Singapore, the IRS still expects you to file a tax return every year.
But here's what many expats don't realize: your state of residence matters just as much as your federal tax obligations. If you were living in California, New York, or another high-tax state before moving abroad, that state may continue claiming you owe taxes on your worldwide income—even years after you've left. This is where establishing Florida residency becomes a powerful financial planning tool.
Florida has no state income tax. By establishing Florida as your legal domicile before or while living abroad, you can:
- Eliminate state income tax obligations entirely
- Combine with the Foreign Earned Income Exclusion (FEIE) to potentially owe zero US tax
- Maintain a stable US address for banking, voting, and legal purposes
- Simplify your eventual return to the United States
Understanding the Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion is one of the most valuable tax benefits available to US expats. Under IRC Section 911, qualifying Americans living abroad can exclude a substantial portion of their foreign earned income from US federal taxation.
2025 FEIE Limits
For tax year 2025, the FEIE allows you to exclude up to $130,000 of foreign earned income from federal taxes. If you're married and both spouses qualify, you can potentially exclude up to $260,000 combined. This exclusion is adjusted annually for inflation.
Qualifying for the FEIE
To claim the FEIE, you must meet one of two tests:
1. The Bona Fide Residence Test
You qualify under this test if you:
- Are a US citizen (green card holders cannot use this test)
- Have been a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year
- Have established genuine ties to the foreign country (housing, social connections, intent to stay)
The key distinction here is that the IRS looks at the quality of your residency, not just the quantity of days. If you have a permanent home abroad, pay local taxes, and are integrated into the local community, you likely qualify.
2. The Physical Presence Test
This is the more common test used by digital nomads and those who move frequently. You qualify if you:
- Are physically present in a foreign country or countries for at least 330 full days during any 12-month period
- Note: A "full day" is a continuous 24-hour period from midnight to midnight
- Travel days to/from the US do not count as full days abroad
The 12-month period doesn't need to align with the calendar year. Many expats strategically choose their qualifying period to maximize their exclusion across multiple tax years.
What the FEIE Covers (and Doesn't Cover)
The FEIE applies to earned income only:
- Covered: Wages, salaries, professional fees, self-employment income
- NOT covered: Investment income (dividends, capital gains, interest), rental income, pension distributions, Social Security benefits
This is why many expats with investment income still have federal tax liability even with the FEIE—and why eliminating state taxes becomes even more important.
Filing Requirements
To claim the FEIE, you must:
- File IRS Form 2555 with your tax return
- File your return by the extended deadline (generally June 15 for expats, extendable to October 15)
- Include documentation of your qualifying days abroad if using the Physical Presence Test
State Tax Obligations While Living Abroad
Here's the critical issue many expats overlook: the FEIE only applies to federal taxes. It does nothing for state taxes. And several states thoroughly review former residents who move abroad.
States That May Still Claim You
California
California is perhaps the most thorough state when it comes to taxing former residents. The Franchise Tax Board (FTB) uses a "closest connections" test and looks at factors like:
- Where your spouse and children live
- Where you maintain bank accounts and professional licenses
- Where your vehicles are registered
- Where you vote and maintain memberships
California thoroughly reviews former residents' documentation, particularly if they maintain California connections. The state's top marginal rate of 13.3% makes proper Florida documentation especially valuable for former Californians.
New York
New York uses a domicile test combined with a statutory residence test. You're considered a New York resident if you:
- Maintain a "permanent place of abode" in New York AND
- Spend more than 183 days in the state
Even if you're abroad most of the year, keeping an apartment in New York could trigger tax liability. New York's top rate of 10.9% (plus NYC's additional 3.876%) makes this a costly mistake.
Other High-Risk States
Several other states have thorough enforcement or complicated exit rules:
- New Jersey: Uses a domicile test and has thoroughly verified expat residency
- Massachusetts: Has "safe harbor" provisions but also a 183-day rule
- Connecticut: Requires formal domicile change documentation
- Minnesota: Has specific statutory residency rules for expats
The Solution: Establish a Tax-Free Domicile
The cleanest solution is to establish legal residency in a state with no income tax before or while living abroad. Florida is the most popular choice for expats because:
- No state income tax on any type of income
- No requirement to spend a minimum number of days in Florida
- Strong legal framework for establishing domicile
- Easy to maintain connections while abroad
- Excellent mail forwarding and virtual mailbox services
How to Establish Florida Domicile as an Expat
Establishing Florida domicile involves demonstrating your intent to make Florida your permanent home. As an expat, you don't need to physically live in Florida—you need to prove that Florida is your legal home base in the United States.
Step 1: Obtain a Florida Residential Address
This is the foundation of Florida residency. You need a real residential address—not a PO Box or commercial mail receiving agency (CMRA). Why does this matter?
- The Florida DMV requires a residential address for your driver's license
- Many banks and financial institutions reject CMRA addresses
- A residential address is stronger evidence of domicile if ever challenged
Services like Your Tax Base provide residential addresses at RV and mobile home communities—addresses that are accepted by the DMV, banks, and government agencies.
Step 2: File a Declaration of Domicile
Florida law allows you to file a formal Declaration of Domicile with your county clerk. This legal document states your intent to make Florida your permanent home. While not required, it's powerful evidence of your domicile and is often requested by:
- Your former state's tax authority during an audit
- Financial institutions for account verification
- Estate planning attorneys for trust and will purposes
Step 3: Obtain a Florida Driver's License
A Florida driver's license is one of the strongest pieces of evidence for Florida domicile. You should:
- Surrender your old state's driver's license
- Visit a Florida DMV office (you'll need to do this in person)
- Provide required documentation (birth certificate, Social Security card, two proofs of Florida address)
As an expat, you may need to plan a US visit to complete this step, but it's worth the effort for the protection it provides.
Step 4: Register to Vote in Florida
Voter registration is another strong indicator of domicile. As a Florida-registered voter, you can:
- Vote in all US elections by absentee ballot
- Exercise your democratic rights from anywhere in the world
- Provide additional evidence of your Florida ties
Step 5: Register Your Vehicle in Florida (If Applicable)
If you own a vehicle, registering it in Florida strengthens your domicile claim. Even if your car is stored while you're abroad, Florida registration demonstrates your connection to the state.
Step 6: Update All Records and Accounts
To cement your Florida domicile, update your address everywhere:
- Banks and investment accounts
- IRS (use Form 8822 to change your address)
- Social Security Administration
- Passport (your last US address should be Florida)
- Professional licenses
- Insurance policies
Maintaining US Domicile While Living Abroad
Once you've established Florida domicile, maintaining it is relatively straightforward. Unlike some states, Florida doesn't require you to spend a minimum number of days in the state to maintain residency.
Key Maintenance Activities
- Keep your Florida driver's license current: Renew before expiration (can often be done online or by mail)
- Maintain your voter registration: Vote in elections via absentee ballot
- Use your Florida address consistently: Don't use addresses in other states for any official purposes
- Keep bank accounts at Florida branches: Having your primary banking relationship in Florida strengthens your ties
- File taxes from Florida: Your tax returns should show your Florida address
What to Avoid
To maintain clean Florida domicile, avoid:
- Getting a driver's license in another state
- Registering to vote elsewhere
- Using another state's address for financial accounts
- Maintaining a "permanent place of abode" in a high-tax state during US visits
- Spending more than 183 days in any single high-tax state
Mail Forwarding Requirements and Solutions
As an expat, managing your US mail is essential. Important documents you'll receive include:
- IRS notices and tax documents (1099s, W-2s, etc.)
- State correspondence
- Bank and financial statements
- Credit cards and debit cards
- Insurance documents
- Legal notices
- Jury duty summons (which you'll need to respond to)
Virtual Mailbox Services
A virtual mailbox service provides:
- Mail scanning: See images of your mail online within 24-48 hours of arrival
- Content scanning: Request scans of letter contents for important documents
- International forwarding: Forward physical mail to 200+ countries
- Package consolidation: Combine multiple packages to save on shipping
- Check depositing: Some services can deposit checks to your bank
USPS Form 1583
To receive mail at a virtual mailbox address, you must complete USPS Form 1583. This form:
- Authorizes the mail service to receive mail on your behalf
- Must be notarized (remote online notarization is now accepted)
- Requires two forms of ID
Services like Your Tax Base integrate online notarization, allowing you to complete this process entirely from abroad.
Banking and Financial Considerations
One of the biggest challenges for American expats is maintaining US banking relationships. Many banks have closed accounts of customers with foreign addresses due to compliance concerns. Having a Florida address helps, but there are additional considerations.
Keeping US Bank Accounts Open
To maintain US banking while abroad:
- Use your Florida address: This is critical—most banks won't maintain accounts with foreign addresses
- Choose expat-friendly banks: Charles Schwab, Fidelity, and some credit unions are known for working with expats
- Maintain account activity: Dormant accounts may be flagged or closed
- Set up online access: Ensure you can manage accounts from abroad
Credit Cards
US credit cards often offer better rewards and fraud protection than foreign cards. To maintain your credit profile:
- Keep cards active with occasional purchases
- Use your Florida address for all cards
- Consider cards with no foreign transaction fees
- Monitor your credit report through the free annual credit report service
Investment Accounts
FATCA and other regulations have made it difficult for expats to maintain investment accounts. With a Florida address:
- You can generally keep existing brokerage accounts open
- Some restrictions may apply to opening new accounts while abroad
- Retirement accounts (IRA, 401(k)) can be maintained regardless of location
Re-entry Considerations: Planning Your Return
When the time comes to return to the United States, having Florida residency provides a smooth transition.
Advantages of Florida for Returning Expats
- No state tax on repatriated income: If you're bringing back savings or receiving deferred compensation, Florida won't tax it
- Existing documentation: Your driver's license, voter registration, and address are already in place
- Banking relationships intact: Your US financial infrastructure is ready to use
- Flexibility: You can take your time deciding where to ultimately settle
Timing Considerations
When returning to the US:
- Maximize your final FEIE year: If you return mid-year, you may still qualify for a partial FEIE
- Consider the tax year: Returning in January vs. December can affect your tax liability
- Plan for the transition: You may need to spend time in Florida to reestablish physical presence
Real Tax Savings: A Practical Example
Let's look at how Florida residency combined with the FEIE can dramatically reduce an expat's tax burden.
Scenario: Software Developer Living in Germany
Consider Sarah, a software developer earning $150,000 while working remotely from Berlin:
Without Florida Residency (California domicile maintained):
- FEIE exclusion: $130,000
- Federal tax on remaining $20,000: ~$2,400
- California tax on full $150,000: ~$11,250
- Total US tax: ~$13,650
With Florida Residency:
- FEIE exclusion: $130,000
- Federal tax on remaining $20,000: ~$2,400
- Florida state tax: $0
- Total US tax: ~$2,400
Annual savings: $11,250
Over a 5-year assignment abroad, Sarah would save over $56,000 by establishing Florida residency—easily justifying the cost and effort of making the change.
Common Mistakes Expats Make
Avoid these pitfalls when establishing and maintaining Florida residency:
1. Not Severing Ties Completely
Keeping a California driver's license "just in case" or maintaining voter registration in your old state undermines your Florida domicile claim. Make a clean break.
2. Using Mixed Addresses
Inconsistent address use—Florida for some accounts, your foreign address for others, old state address for a few—creates a confusing paper trail that could be used against you in an audit.
3. Ignoring the Bona Fide Residence Test
Many expats focus exclusively on the Physical Presence Test when the Bona Fide Residence Test might better suit their situation, especially if they're settled in one foreign country.
4. Failing to Document
Keep records of your travel, your domicile establishment steps, and your ties to Florida. If audited years later, you'll be glad you did.
5. Procrastinating
The best time to establish Florida residency is before you move abroad. The second best time is now. Waiting only extends your exposure to state taxes.
The Foreign Housing Exclusion: Additional Tax Savings
Beyond the FEIE, qualifying expats may also claim the Foreign Housing Exclusion (FHE) or Foreign Housing Deduction. This allows you to exclude or deduct additional amounts for housing expenses paid with employer-provided funds or self-employment income.
What Qualifies as Housing Expenses
Qualifying housing expenses include:
- Rent or fair rental value of employer-provided housing
- Utilities (excluding telephone)
- Residential parking
- Property insurance
- Furniture rental
- Repairs
Housing Exclusion Limits
The housing exclusion is calculated as actual housing expenses minus a base amount (16% of the FEIE limit, or approximately $20,800 for 2025). There are also location-based caps—expensive cities like London, Hong Kong, and Singapore have higher limits than less costly areas. Check IRS Form 2555 instructions for current limits by location.
FEIE vs. Foreign Tax Credit: Making the Right Choice
Some expats may benefit from the Foreign Tax Credit (FTC) instead of or in addition to the FEIE. The FTC allows you to offset US taxes with foreign taxes paid, potentially reducing or eliminating your US tax liability.
When to Consider the FTC
The Foreign Tax Credit may be better if:
- You live in a high-tax country (e.g., France, Germany, UK) where foreign taxes exceed what you'd owe the US
- You have significant investment income not covered by the FEIE
- You earn more than the FEIE limit and want to reduce taxes on the excess
Key Differences
| Factor | FEIE | Foreign Tax Credit |
|---|---|---|
| What it does | Excludes income from US taxation | Credits foreign taxes against US tax |
| Income types | Earned income only | All income types |
| Maximum benefit | $130,000 exclusion (2025) | Limited to actual foreign taxes paid |
| Best for | Low/no foreign tax countries | High foreign tax countries |
Important: You can use both FEIE and FTC, but you cannot claim the FTC for foreign taxes paid on income you've already excluded with the FEIE. Consult with an expat tax professional to optimize your strategy.
FBAR and FATCA: Reporting Foreign Accounts
Beyond income taxes, US expats have additional reporting requirements for foreign financial accounts.
FBAR (FinCEN Form 114)
If the combined value of your foreign financial accounts exceeds $10,000 at any point during the year, you must file an FBAR. This includes:
- Foreign bank accounts
- Foreign investment accounts
- Foreign pension accounts
- Accounts where you have signature authority
The FBAR deadline is April 15 with an automatic extension to October 15. Penalties for non-compliance can be severe—up to $12,500 per violation for non-willful violations, and up to the greater of $100,000 or 50% of account balance for willful violations.
FATCA (Form 8938)
FATCA requires reporting specified foreign financial assets if they exceed certain thresholds. For expats living abroad, the thresholds are:
- Single filers: $200,000 on the last day of the year, or $300,000 at any point
- Married filing jointly: $400,000 on the last day, or $600,000 at any point
Form 8938 is filed with your tax return and covers similar accounts to FBAR, plus other foreign financial assets like foreign stock or securities, foreign partnership interests, and foreign financial instruments.
Having Florida residency doesn't change these requirements, but it does simplify your overall tax situation by eliminating state-level complications.
Getting Started with Your Tax Base
Establishing Florida residency while living abroad is straightforward with the right support. Your Tax Base provides:
- Real Florida residential address: Accepted by DMV, banks, and government agencies
- Virtual mailbox: View and manage your mail online from anywhere
- Declaration of Domicile support: Guidance on filing your official declaration
- Online notarization: Complete Form 1583 without finding a notary abroad
- International mail forwarding: Forward mail to 200+ countries
Ready to eliminate state taxes and simplify your expat life? View our service plans or contact us with questions about your specific situation.