Virginia State Expat Tax Requirements: Do I Still Need to File?
Virginia collects $6,179 per capita in state and local taxes, making it one of the most expensive states compared to others. But here’s what most expats don’t realize until it’s too late – moving abroad doesn’t automatically eliminate your Virginia tax responsibilities.
Yes, you likely still need to file Virginia tax returns if you lived there before moving overseas, unless you’ve taken specific steps to prove you’ve abandoned your Virginia domicile. Virginia operates under a “sticky” domicile system that can keep you liable for state taxes on your worldwide income, even years after you’ve moved abroad.
However, most expats in your situation either owe very little Virginia tax or qualify for strategies that minimize their obligations significantly. The key is taking the right steps now, whether you’re behind on filing, recently moved abroad, or just discovered your Virginia obligations. You can achieve peace of mind with a clear plan forward.
Am I Still Considered a Virginia Resident for Tax Purposes?
Your Virginia tax obligations depend on whether Virginia considers you a resident or non-resident, which isn’t as simple as where you currently live.
- Virginia residents must file and pay taxes on their worldwide income, including foreign salaries, investment income, and any other global earnings. Virginia doesn’t allow tax credits for foreign income or taxes paid to other countries, making it particularly expensive for expats who remain residents.
- Non-residents only file Virginia returns if they receive Virginia-source income, such as rental property, business income, or wages earned in Virginia.
Virginia’s challenge is that it uses a complex “domicile” test rather than simple residency rules. According to the Virginia Department of Taxation, if you haven’t “abandoned your legal domicile in Virginia and established legal domicile in another jurisdiction, you remain a domiciliary resident of Virginia, even if residing in another jurisdiction for a number of years.“
Your domicile is your permanent legal home – the place you always intend to return to. Simply living abroad doesn’t change your Virginia domicile unless you take deliberate steps to abandon it.
If you’ve maintained any Virginia ties like a driver’s license, bank accounts, voter registration, or property ownership, Virginia likely still considers you a resident.
How Do I Know If Virginia Still Considers Me a Resident?
Virginia examines multiple factors to determine if you’ve truly abandoned your domicile. The more Virginia connections you maintain, the stronger their claim that you remain a resident.
Property and Financial Connections:
- Owning Virginia real estate (even if rented out)
- Maintaining Virginia bank accounts, investment accounts, or credit cards
- Keeping Virginia-based insurance policies
- Having Virginia business interests or professional licenses
Legal and Civic Ties:
- Current Virginia driver’s license or ID card
- Virginia voter registration
- Vehicle registration in Virginia
- Professional or business licenses in Virginia
Personal and Family Connections:
- Spouse or children living in Virginia
- Plans to return to Virginia eventually
- Virginia-based medical care or professional services
- Memberships in Virginia clubs or organizations
Real example: Jennifer moved to Germany for what she thought was a permanent job, but kept her Virginia driver’s license and bank account “just in case.” She maintained voter registration and a storage unit with personal belongings. After three years, the Virginia State audited her and demanded taxes on her German salary, totaling $31,000, plus penalties. The key phrase that hurt her was “just in case,” which showed she hadn’t truly abandoned her Virginia domicile.
What If I Have Virginia Income But Live Abroad?
Even if you successfully establish non-resident status, you may still need to file Virginia returns for income earned from Virginia sources.
Virginia-source income requiring non-resident filing:
- Rental property income (most common for expats)
- Business income from Virginia partnerships or S corporations
- Consulting or freelance income for Virginia-based clients
- Investment income from Virginia businesses
- Virginia Lottery winnings or gambling proceeds
Example calculation: David lives in London and owns a rental property in Norfolk that generates $15,000 annual net income. As a non-resident, he pays Virginia tax only on this $15,000, not his London salary. His Virginia tax: approximately $750 annually – much better than worldwide taxation.
Interest from personal bank accounts and pension/annuity payments from Virginia sources don’t require non-resident filing in most cases.
What Should I Do If I’m Behind on Virginia Filing?
Don’t panic if you’ve been living abroad and haven’t filed Virginia returns. Most expats in your situation resolve their compliance issues without devastating financial consequences.
Step 1: Assess Your Exposure
Determine whether Virginia considers you a resident and calculate potential tax liability. Many expats discover their actual liability is much lower than feared, especially if they qualify for partial-year resident status.
Step 2: Consider Streamlined Filing
If your failure to file was non-willful (you didn’t know about the requirement), you may qualify for the IRS Streamlined Filing Compliance Procedures. This addresses your federal obligations and often provides a foundation for resolving state compliance.
Step 3: Virginia Voluntary Disclosure
Virginia offers voluntary disclosure programs for taxpayers who come forward proactively. This typically reduces penalties significantly compared to waiting for Virginia to find you.
Step 4: Establish Going-Forward Strategy
Once current, implement a strategy to minimize future Virginia obligations, whether through establishing clear non-residency or planning for ongoing compliance.
Success story: Michael lived in Singapore for four years without filing Virginia returns, accumulating an estimated $28,000 in taxes and penalties. Through strategic compliance planning and Virginia’s voluntary disclosure program, we reduced his total liability to $12,000 and established a clear non-resident status going forward. His annual Virginia obligation dropped from $7,000 to $0.
How Can I Minimize My Future Virginia Tax Obligations?
Strategy 1: Establish Clear Non-Residency
If you haven’t already, sever your ties with Virginia systematically. This includes:
- Selling Virginia property or converting to arm’s-length rental arrangements
- Closing Virginia bank accounts and investment accounts
- Surrendering a Virginia driver’s license and obtaining a foreign/new state license
- Canceling Virginia voter registration and registering in a new location
- Updating all professional licenses and business registrations
Strategy 2: Document Your Permanent Move
Maintain detailed records proving your move abroad is permanent:
- Employment contracts showing long-term or indefinite overseas assignments
- Foreign visa/residency documentation
- Evidence of family relocation (spouse, children, pets)
- Integration into new community (clubs, religious organizations, medical care)
Strategy 3: Consider Alternative State Residency
If you plan to return to the US eventually, consider establishing residency in a state with no income tax, such as Texas, Florida, or Nevada, before returning. This requires genuine relocation and establishment of ties, not just a mailing address.
Strategy 4: Plan for Virginia-Source Income
If you maintain Virginia rental property or business interests, optimize the tax treatment:
- Structure rental activities to minimize taxable income
- Consider professional management to reduce personal involvement
- Plan for eventual disposition of Virginia assets
Will Federal Expat Tax Benefits Help with Virginia?
Here’s a critical point that surprises many expats: federal expat tax benefits don’t eliminate Virginia obligations.
- Foreign Earned Income Exclusion (FEIE): For 2025, you can exclude up to $130,000 in foreign earned income from federal taxes. However, Virginia doesn’t recognize this exclusion, so you’d still owe Virginia tax on the full amount if you’re considered a resident.
- Foreign Tax Credit (FTC): This provides a dollar-for-dollar credit for foreign taxes paid against your federal tax liability. Again, Virginia doesn’t allow credits for foreign taxes, so this doesn’t help with state obligations.
Example: Sarah earns $85,000 in Australia and pays $25,000 in Australian taxes. For federal purposes, she excludes her entire salary and owes $0. For Virginia (if she’s still considered a resident), she owes Virginia tax on the full $85,000 with no credit for Australian taxes paid. Her Virginia liability: approximately $4,250.
This is why establishing non-resident status or severing ties to Virginia is crucial for expats.
When Should I Get Professional Help?
Consider professional assistance if you:
- Own Virginia property or have complex business interests there
- Have been living abroad without filing Virginia returns for multiple years
- Earn significant income from Virginia sources as a non-resident
- Are uncertain about your residency status under Virginia’s domicile rules
- Face Virginia tax assessments, audits, or collection actions
- Want to establish a proactive strategy for minimizing future obligations
The complexity of Virginia’s domicile rules and the potential financial impact make professional guidance a wise investment. Our state tax specialists regularly assist expats in resolving multi-year Virginia compliance issues and establishing strategies that provide long-term peace of mind.
What’s My Next Step?
- If you’re current on Virginia filing, review your residency status and consider whether you can establish non-residency for future years by changing your state residency while abroad.
- If you’re behind on filing, don’t wait for the Virginia Department of Taxation to contact you. The longer you wait, the more penalties accumulate. Start by assessing your exposure and considering voluntary disclosure options.
- If you’re unsure about your status: Get clarity now rather than hoping for the best. A consultation can save you thousands in unnecessary taxes and penalties.
- If you’re planning to move abroad: Take steps to establish clear non-residency before you leave, or consider establishing residency in a tax-free state first.
No matter how late, messy, or complex your Virginia tax situation may be, we can help. You’ll have peace of mind, knowing that your taxes were done right.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.
Whether you’re years behind or just unsure about the thresholds, our team is ready to help.
This article is for informational purposes only and should not be considered legal or tax advice. Tax laws are complex and subject to change. Individual situations vary, and you should consult with qualified professionals for guidance specific to your circumstances.
