Do US expats need to file Pennsylvania state taxes? Possibly. One thing for sure though, is that all US Citizens and Greencard Holders are required to report their worldwide income to the IRS regardless of where they live and work (just see this post to learn more about that).
If you are no longer domiciled (meaning, you don’t consider yourself to have a permanent home in the states that you will return to if your job contract expires) read on. If you still are domiciled in Pennsylvania, you will most likely need to file a state return every year!
Here’s a simple guide that helps you determine whether you need to file Pennsylvania state taxes:
Did you live in Pennsylvania for any part of the year?
- Yes: You will need to file as Part-Year Resident, skip down below
- No: Continue on
Did you earn any Pennsylvania sourced income during the year?
- Yes: File as Non-Resident, skip down below
- No: You don’t need to file
Every Resident, part-year resident or nonresident individual must file a Pennsylvania Income Tax Return (PA-40) when he or she realizes their income generates $1 or more in tax, even if no tax is due (e.g., when an employee receives compensation where tax is withheld).
Non-Residents are taxed only on the income they receive from sources within Pennsylvania, and cannot qualify for credit for taxes paid to other states.
A Part-Year resident is subject to the Pennsylvania personal income tax for the portion of the year the individual was a resident of Pennsylvania. The same taxpayer is subject to the Pennsylvania personal income tax as a nonresident for the remaining portion of the year.
What is Pennsylvania Sourced Income?
- Money/income earned while you worked physically in Pennsylvania State (i.e. any income including normal salary from your non-US employer) or while on a business trip to Pennsylvania.
- Or income earned from physical property located in Pennsylvania (i.e. rental income from your old Pennsylvania home).
More specifically Pennsylvania Taxes the following eight classes of income:
- Net profits from the operation of a business, profession or farm
- Net gains or income from the dispositions of property
- Net gains or income from rents, royalties, patents and copyrights
- Income derived through estates or trusts
- Gambling and lottery winnings
Detailed guidance regarding each specific class of income can be found here.
Pennsylvania Specific Filing Details
Non-Residents are subject to tax only on income from the eight enumerated classes of income earned, received or acquired from Pennsylvania sources.
Non-Residents are also not subject to Pennsylvania tax on ordinary interest and dividends from investments, or gains realized on the sale, exchange, or disposition of intangible property derived from sources within Pennsylvania.
For the portion of the year, the person did not reside in Pennsylvania, a Part-Year Resident is not subject to Pennsylvania tax on ordinary interest, dividends, gains from intangible property and any other intangible income.
Expat Tax Benefits
Which expat tax benefits does Pennsylvania State allow?
Moving Expenses: No
Foreign Earned Income Exclusion: No
Foreign Tax Credit: No
A lot to process?
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