Americans who choose to retire abroad still carry certain tax responsibilities. In most cases, you’ll need to file a tax return with the U.S. government as well as with your new country of residence. In some situations, you may also be required to file a return with the state where you previously lived. To better understand the tax impact of retiring overseas, let’s break down the different scenarios.

US Federal Taxes

Almost all Americans are required to file a U.S. federal tax return, even if they live abroad. This includes reporting income from all sources around the world, not just income from the United States. The upside is that many people living overseas don’t end up owing U.S. taxes when they file.

US State Taxes

Many U.S. states continue to impose taxes on former residents until they officially cut ties with that state. The process for doing so varies—some states make it relatively simple, while others make it more challenging to end your tax obligations there. Some state may still require you to pay taxes if:

• They issued your current driver’s license or ID card
• You own property there or maintain a mailing address there
• Your vehicle is registered there
• You have a bank account open there
• You’re registered to vote there

Foreign Taxes

If you reside in another country, you will likely need to file taxes there in addition to filing with the United States. However, some countries do not impose income taxes at all, examples: Costa Rica, Bermuda, Bahamas, British Virgin Islands, Oman, Kuwait, United Arab Emirates, Monaco, and others.