Do foreign tax credits also apply to state taxes? How do I ensure I'm exempt from my state taxes if I earned income solely overseas?

[TomYoung]

You may or may not be "exempt" from state taxes, depending on your state of residence.  Certainly California has no comparable concept of "foreign tax credits" and happily taxes your income IF you are a resident.

Maybe this will help:
<a rel="nofollow" target="_blank" href="https://www.amexpattax.com/news/alleviating-double-taxation-foreign-income-state-level/">https://www...>

[iancglennon]

Hi, this certainly helps. However, the situation is a bit "particular". The state in question is Maryland. And, the only income I earned for the entire year was an 8-week internship in Australia...the other 46 weeks I was technically in the US.

 Taxes are higher in Australia than in the US, so the foreign tax credit works great on the federal level. What is the equivalent way to get exempted from these taxes on the state level?

[TomYoung]

I know nothing about Maryland taxes but I'd guess it comes down to whether you were a resident of Maryland for the year.  Eight weeks in Australia isn't going to do it.  The first thing you need to do is determine if you were a Maryland resident, or not.  That's pretty much a "facts and circumstances" situation.

On the other hand, there's another way to look at this.  If you worked 8 weeks in Virginia while being a Maryland resident then you would even THINK that somehow being taxed by both the feds and the state was "double taxation."  You'd only complain about that if both Virginia AND Maryland extracted their full tax on your earnings.

[iancglennon]

Hi, thanks Tom. I was indeed a Maryland resident. Does this mean I owe Maryland taxes even if I paid foreign taxes?

[pk]

Maryland ( after the Supreme Court  case ) is like all other states  , will indeed give credit for income taxes paid  to "other states"( sometimes called foreign taxes ) but absent a suspension of residency ( like absent for more than a year ),  they tax world income and no credit given for taxes paid to a foreign govt. Sorry

[pk · Accepted solution]

answered by TomYoung

[Parallel2]

The updated link is for that article as per the American Expat Tax Service website is https://www.amexpattax.com/wp-content/uploads/2021/01/Alleviating-Double-Taxation-on-Foreign-Income-...