The short answer to your question is no, you do not need to file a tax return with, or pay income taxes to, the state of California under these circumstances. Neither do you have to pay state taxes to New York. The longer and more complete answer to your question follows.
If you are a US citizen now residing another country, please remember that the
United States continues to tax you on all of your worldwide income (one
of the few countries that does so for expats). Thus, as you probably
know, you have to report, and pay taxes upon, your worldwide income, as
long as you retain your US citizenship . . . even if you permanently
live abroad in a foreign country. And, as an employee of the US government (which includes military as well as civilian personnel), you are unfortunately not eligible for the foreign earned income exclusion benefit (IRS Form 2555) available to non-government employees.
With respect to California income taxes, we
did some further research on this for you. As it turns out, by moving abroad
you are are able to "abandon" your California residency (tax
domicile) for state tax purposes. You are therefore not
be taxed on
your US income (by the state of California) if you live all year in a
foreign country for a period of time as long as you have; nor will you have to file a California state income
tax return. Please refer to the California Franchise Tax Board
Publication
1031 for details:
https://www.ftb.ca.gov/forms/2016/16_1031.pdf
In particular, the examples on Page 5, and the discussion on Page
9, are helpful and applicable to your present circumstances.
In
order to accomplish this mechanically in TurboTax -- that is to force
the program to only tax your income on a federal level -- simply
indicate that your state of residence is "Foreign or US Possession" in
the Personal Information section of the program, at the very
beginning. This way you will only need to file a federal tax return,
and not a California tax return.
When done correctly it should
look something like the screen-capture image below this text; simply
click the image to open.
Also,
please don't forget any annual foreign financial account disclosures
that you may have to file, if you maintain a bank account or other financial
account outside of the US.
In
fact, there are two
separate disclosure forms that may be required for US citizens with an
account at a foreign bank; each also has different
reporting rules.
One is known as IRS Form 8938, and can be
attached to the relevant yearly Form 1040 tax return (which you could
file for free using TurboTax, if you have no taxable income).
The other is known as FinCen
Form 114, which can only be filed via the internet. The following
Internal Revenue Service webpage describes them in some detail, and provides
their dollar value reporting levels (called the "Reporting Threshold"):
https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements
Form 8938 is included in
TurboTax, as indicated; whereas FinCen Form 114 is not included with TurboTax, and you would need to access that reporting
webpage separately. Note that you can get to the FinCen reporting internet site directly
through the above IRS link (a link within a link, essentially).
Finally, if you've been paying California state income taxes for the past several years (where you actually didn't have to), you may wish to consider filing some "amended" California tax returns (2015, 2014) to claim refunds for those tax years, while the statue of limitations for doing so is still open. If you decide to do this, however, you may wish to retain an income tax professional (accountant or lawyer, for example), simply to ensure that the state refund filing claims are made correctly. (You should not need to amend your federal tax returns, however.)
Thank you for asking this important question, and we hope that you enjoy living abroad.
