Leaving the U.S. for Spain: State Exit Rules, Taxes, and What Expats Must Know

Moving to Spain from the United States is a huge life change in itself. If, in addition, you are leaving a state such as California, Florida, or Texas, there is a lot more to worry about than just federal paperwork. Each state has its own rules when it comes to taxes, healthcare cancellation, driver's licenses—and even how you can prove that you have officially “moved”. If you are not extremely careful, your old state could still consider you a resident and could bill you for income tax, insurance penalties, or vehicle fees—even after you have started living in Spain full-time.

In this article, we explain what Americans—particularly those from California and other high-tax or complex states—need to know before taking the plunge.

Why state-specific exit rules matter when moving to Spain

Unlike many countries, the United States does not have a single unified tax system for individuals. You will deal with the IRS at the federal level, but many states—especially California, New York, and others—have their own systems that continue to pursue tax and residency obligations even after you leave the country.

If you move abroad without formally severing ties with your home state, you could be liable for taxes and penalties long after you arrive in Spain.

States that are easiest to leave (and those that are not)

• California: Most aggressive. Assumes you are still a resident unless you take specific, provable steps to sever ties. Continues pursuing taxes after departure.
• New York: Also aggressive. Distinguishes between residency and domicile, meaning you can be taxed even with minimal time spent in the state. High earners who move abroad are frequently investigated.
• Florida: No income tax, but requires verifiable cancellation of DMV records, voter registration, and insurance to prove departure.
• Texas: No income tax, but driver's license must be updated, vehicles deregistered, and local insurance policies cancelled.
• Washington, Nevada, Wyoming, Tennessee: No income tax and comparatively easy to leave—but your departure should still be made official.

How California tries to keep you on the tax hook

The California Franchise Tax Board (FTB) is notorious for continuing to tax former residents. If you fail to cut ties properly, they may classify you as a “temporary non-resident,” especially if you retain a home, bank accounts, a California driver’s license, voter registration, or business interests in the state.

The FTB examines more than a dozen factors to determine whether you truly left the state—not just your physical absence. Even if you live in Spain, you could face taxation on worldwide income if they conclude you remain domiciled in California.

How to prove that you have left: state-exit checklist

• Terminate your U.S. residential lease or sell your home.
• Cancel utilities and all U.S.-based insurance policies.
• Surrender your driver’s license and vehicle registration.
• Notify your state’s DMV and voter registration office.
• Update your mailing address to a foreign address or a U.S. mail service located in a different state.
• Stop using credit cards tied to your former state.
• File a final part-year state tax return.
• Keep documentation of your departure and Spanish residency (empadronamiento, visa, rental contract).

Do I still have to file a state tax return?

If your state has income tax (e.g., California or New York), you will usually need to file a part-year resident return for the year in which you leave. After that, if you have successfully changed your domicile and have no income sourced to that state, you generally will not need to file again—but this depends strictly on completing the exit process correctly.

U.S. federal tax vs. state tax while living in Spain

Federal tax is based on citizenship. All U.S. citizens must file an annual IRS return no matter where they live. You can often reduce or eliminate federal tax through:

• Foreign Earned Income Exclusion (Form 2555)
• Foreign Tax Credit (Form 1116)
• Income treaties between Spain and the U.S.

State tax, however, is based on residency—and can be shed if handled correctly. Forty-one states and Washington, DC, collect income tax; nine states do not. Compliance is essential to avoid penalties or audits.

Healthcare differences: U.S. private plans vs. Spanish system

Most U.S. private or employer health plans (including ACA plans) do not cover you long-term abroad. Medicare does not apply outside the U.S. In Spain, you will need valid health insurance that meets visa and residency requirements. Spain also has a public health system, although access depends on work contributions or the Convenio Especial. Many Americans choose private health insurance for faster access, English-speaking doctors, and visa compliance.

Driver’s license issues when moving abroad

After moving to Spain, you will eventually need to switch to a Spanish license. Until then, your U.S. license may be valid if paired with an International Driving Permit (IDP). Most U.S. states require you to surrender your license once you no longer reside there. In California, continued use after relocation can violate residency or insurance rules.

What about bank accounts and credit cards?

Keeping U.S. bank accounts while living in Spain is legal, but may trigger FATCA reporting and state residency questions. Continuing to use cards tied to a former state address may be interpreted as proof of ongoing residency. Consider switching to international-friendly banks like Wise or Revolut and update your address with all financial institutions.

Student loans and IRS debts after moving

Your debts do not disappear when you move abroad. Federal student loans, IRS payment plans, and state obligations still apply. The IRS can garnish tax refunds and certain payments if you fall behind. Some states also pursue debtors abroad—especially if they were not properly notified of your departure.

How to avoid common pitfalls when moving from the U.S.

• Do not leave loose ends—cancel everything formally.
• Document everything—keep proof of deregistration and your Spanish address.
• Don’t assume states will ignore your departure—California and New York often pursue audits.
• Do not use a friend’s address in your old state—this undermines your residency claim.

Final tip: Consult a tax advisor familiar with international moves

State tax codes are complex—especially California’s. A U.S.-based international tax advisor or cross-border CPA can guide you through proper exit procedures, residency rules, and documentation that will withstand scrutiny. This is not something to DIY.

Get Visa-Compliant Health Insurance Without Co-Payments

If you’re leaving the U.S. for Spain, you will need private health insurance that meets Spanish visa and residency requirements. Sanitas offers comprehensive no-copayment plans, providing full cover with no surprise fees and peace of mind from day one. Find out more about Sanitas No Copayment Health Insurance.