In reply to your question about Maryland
residency, I've gathered together some materials for you to read. They
can be found at the following (2) Maryland webpages:
http://taxes.marylandtaxes.com/Individual_Taxes/Individual_Tax_Types/Income_Tax/Filing_Information/D...
http://taxes.marylandtaxes.com/Resource_Library/Tax_Publications/Administrative_Releases/Income_and_...
My own reading of those materials would lead me, as a CPA, to
conclude that you are a full-year Maryland resident for the tax
year, even if you live overseas for the whole year. For future tax years you will continue to remain a Maryland resident for tax purposes, even if
living year-round in a foreign country, until such time as you establish
residency in another US state (or if you cease to become an American
citizen, and emigrate to a foreign country . . . but that's a drastic
step to take to rid oneself of Maryland residency simply for tax
reasons).
Essentially,
according to Maryland state law, you will retain your Maryland
"domicile" (which is a well-established legal concept) for state tax
purposes, unless one of two things happen. One, you establish a tax
"domicile" in another US state; or two, you become the citizen of a
foreign country and give up your US citizenship. It doesn't matter if
you continue to physically live overseas for years and
years -- you cannot rid yourself of your Maryland state tax domicile,
except in one of the two ways just described.
Yes, it's a pretty
tough standard and a burden to meet. If you were able to utilize the
Foreign Earned Income Exclusion (see the rules for IRS Form 2555 at the
following link):
https://www.irs.gov/pub/irs-pdf/i2555.pdf
then your Maryland taxes wouldn't matter as much, because you could
exclude much or most of your overseas income for state tax purposes too.
However,
since you work for the United States government (whether in a civilian
capacity or a military capacity it doesn't matter), you aren't eligible
for the foreign earned income exclusion. So, that's not an
option. Civilians not working for the US government, or those who are
self-employed, can take advantage of the Foreign Earned Income Exclusion
as long as they meet certain tests.
Realistically, you could
return to the United States at some point, on let's say a very long
vacation for example, and attempt to establish residency in a state with
no income taxes, like Florida for example (get a Florida drivers
license, register to vote there, have all of your bank accounts and
credit cards transferred there, etc.). That could allow you to change
your state tax domicile, and would be a way to avoid Maryland taxes in
future years, as well as the obligation to file future tax returns there
-- but this is a big step to take.
Unfortunately, the Maryland state tax system is fairly difficult to avoid, and doesn't favor expats.
Thank you for asking this important question.
