State Income Tax and Residency
Most people plan for federal tax and are then blindsided by the state. States run their own residency rules, their own filing requirements, and — critically — they are not parties to the US–Korea tax treaty. Relief you obtain at federal level may simply not exist at state level, and a state you thought you had left can keep taxing you.
Who this affects
- Anyone moving between US states, or leaving the US entirely
- Korean nationals on assignment in a high-tax state
- Remote workers paid from one state while living in another
- Anyone relying on treaty relief for federal purposes
Treaties bind the federal government, not the states
A treaty article that exempts your income federally generally has no effect on a state return unless that state has chosen to conform. Income you correctly excluded on the federal return can be fully taxable to the state.
Some states make leaving genuinely difficult
A handful of states apply demanding domicile tests and continue to treat you as resident until you demonstrate you have established a home elsewhere and severed ties. Moving abroad without documenting the break can leave you filing there for years.
Domicile and physical presence are different tests
States typically tax both people domiciled there and people who spent enough days there, on separate tests. Failing either one is enough, which is how someone can owe two states in the same year.
There is no single national rule to learn
Rates, thresholds, credits for taxes paid to other states, and treatment of foreign income all vary state by state. Advice that is correct in Texas is frequently wrong in California or New York.
Common questions
I moved back to Korea. Do I still file a state return?
Possibly, if the state still considers you domiciled there. Some states require clear evidence that you established a home elsewhere and cut ties before they stop treating you as resident.
Does the US–Korea treaty protect me from state tax?
Generally no. States are not parties to federal treaties, and only some conform voluntarily. This is one of the more common and expensive surprises.
I live in one state and my employer is in another. Who taxes me?
Potentially both, with a credit mechanism intended to prevent true double taxation. The rules differ by state pair, and remote work has made this considerably messier.
Official sources
General information, not tax advice. Rules and thresholds change, and how they apply depends on your circumstances — confirm with a licensed professional before acting.