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—in particular 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—in particular California, New York and a few 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. Keeps chasing taxes even after you have left.
• New York: Also aggressive. Distinguishes between residency and domicile, meaning that you can be taxed even if you only spend minimal (visiting) time in the state. High earners who move abroad are regularly investigated.
• Florida: No income tax, but still requires verifiable cancellation of DMV matters, voter registration, and insurance in order to prove that you have left.
• 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 relatively easy to leave—but still worth making your departure 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 consider you a “temporary non-resident,” especially if you retain a home, bank accounts, a driver’s license, voter registration, or business interests in the state.

According to the FTB’s guidance, they examine more than a dozen factors in order to determine whether you have really left the state—not just your physical absence. Even if you live in Spain, you could be taxed on your worldwide income if they believe 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 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. mailing service (not in the same state)
• Stop using U.S. credit cards tied to your home state
• File a final part-year state tax return
• Keep records of your departure and Spanish residency (e.g., 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 likely need to file a part-year resident tax return for the year you leave. After that, if you have successfully changed your tax domicile and have no income from that state, you should no longer need to file—but this depends heavily on your compliance with the exit process.

U.S. federal tax vs. state tax while living in Spain
Federal tax is based on your citizenship—all Americans must file an annual IRS return regardless of where they live. You can often reduce or eliminate your U.S. federal tax via:

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

State tax, by contrast, is based on residency, and can be shed if done correctly. Forty-one states and Washington, DC, collect income taxes every year, whilst nine states collect no income tax at all. Regardless of your state, it is important to fulfill your ongoing tax obligations in order to avoid problems or even fines and penalties.

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

Most U.S. private or employer-based health plans (including ACA plans) do not cover you outside the country long-term. Medicare does not apply overseas. Once you move to Spain, you will need valid health insurance that meets Spanish standards—particularly if you are applying for a visa or residency. Spain has a public health system (you may be eligible via convenio especial or work-based contributions). Many Americans opt for private health insurance in order to skip waiting times, choose English-speaking doctors, and meet visa requirements.

Driver’s license issues when moving abroad

If you move to Spain, you will, after a few months, need to switch to a Spanish license. In the meantime, your U.S. license might still be valid, if paired with an International Driving Permit (IDP). Most U.S. states require you to surrender your license if you no longer reside there. In California, using your old license after moving could actually violate residency laws or insurance requirements. Make sure to formally surrender if required.

What about bank accounts and credit cards?

Keeping your U.S. bank accounts while living in Spain is legal, but may trigger issues with FATCA reporting and state audits. If you continue to use cards tied to your old address, it could be seen as evidence 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

Leaving the U.S. does not erase debts! If you have federal student loans, IRS payments, or other obligations, you will still need to repay them. The IRS can garnish tax refunds and certain Social Security payments if you fall behind. State agencies may try to collect even when you are abroad—especially if you failed to properly notify them of your departure.

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

• Do not leave loose ends—formally cancel/terminate everything.
• Document everything—save proof of deregistration and your new Spanish address.
• Do not assume that your state will not follow up—California and New York most definitely do.
• Do not rely on mailing addresses at friends’ homes—this undermines your claim of departure.

Final tip: Consult a tax advisor familiar with international moves

State tax codes are complex—and the stakes are high. A U.S.-based international tax advisor or cross-border CPA can walk you through state-specific forms, safe timelines, and documentation that will stand the test if you are audited. Do not DIY this one—it really is worth getting expert help.

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