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State Taxes for Missionaries

Question:

Is a missionary couple, whose time in the U.S. usually consists of fund raising, speaking to donors and churches, and spending time with family, responsible for paying state taxes for the time spent in the U.S.?

Answer:

First, all U.S. citizens are subject to taxation on their worldwide income regardless whether it is earned while in the U.S. or earned abroad. State tax laws vary. Several do not have state income taxes. Others allow the federal earned income exclusion or have other rules to limit taxable income for state residents living in a foreign country.  However, time spent in the U.S. will limit a missionary's foreign earned income exclusion.

The federal guidelines that many states use may be expressed as following:

"The maximum amount of foreign earned income that may be excluded is $95,100 for calendar year 2012 (Rev. Proc. 2012-40). The exclusion is computed on a daily basis. Therefore, the maximum limit must be reduced ratably for each day during the calendar year that the taxpayer does not qualify for the exclusion" (2012 U.S. Master Tax Guide pg. 803).

Usually the state in which the missionaries most likely will be classified as residents is the state in which they last lived. Other indicators of state of residency include state in which a taxpayer holds a valid driver’s license, state in which he or she votes, or the state in which home ownership is established.

Missionaries should check with their state's revenue website for guidance to help determine taxable amounts of income.

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