As a US citizen planning on moving out of the country for a while, what do I need to know about income tax, both federal and state?

There are extremely nice exclusions and . The IRS has a publication that lists them. You really should talk to a person who is familiar both with US tax law and the tax law of the place you are moving to, because there are often weird interactions. You can get a list of tax people for your destination by going to the website of the U.S. embassy for the country you are moving to, and there is a list of tax preparers. As far as , one thing that I did was to move out of my apartment to a hotel, cancel everything that I could that set me up as a resident, and note the date that I did these things. There is one big gotcha with state taxes: they will tax based on the source of the income. So if you worked in on 2010, got a bonus on 2011, and then file income taxes in 2012, part of the bonus income is still subject to state taxes. This can be annoying if you underwithhold and then have to pay a penalty since the company may pay the bonus without withholding state income tax. This is one incentive for moving out as early as possible.

State taxes, just break your nexus (cancel your driver's license, don't maintain an address, sell all real property). You can use EarthClassMail for your US mailing address, pick another state. Oregon default address is fine, even though they have state income tax, just using an Oregon mailing address doesn't make you resident. If you renounce, you first need foreign citizenship, and you'll pay an exit tax (as if you sold all your assets at fair market value the day you renounce); you get a 10-year visa if your passport is not from a visa-waiver country. Assuming you're not renouncing, you can qualify for a Foreign Earned Income exclusion if you earn income outside the United States. It's ~$93K/year (adj annually for inflation); you must establish a foreign tax domicile or use the physical presence test. All other federal taxes still apply (self-employment, unearned income (interest, capital gains, etc) on your global income. Also, you'll run into a lot of regulations most U.S. residents don't know about, like foreign bank account reporting (FBAR), controlled foreign corporation reporting (CFC), passive foreign investment company reporting (PFIC), Foreign Account Tax Compliance Act reporting (FATCA), etc.

You need to know the taxes in the country you move to and how they integrate with the US tax law prior to your move. Many countries will have surprise tax rates on offshore assets (i.e., the ones you still have in the US) that can cause quite a discomfort if you discover this after you move. Every year I see one or two clients who have a double tax bill that cannot be reduced by treaty because they waited until after they moved to find out how the new country taxes the assets they still have in the US. It all would have been resolved nicely had they done a bit of restructuring prior to the move. You will no longer be resident in the US. You will remain domiciled there. Domicile and residence are two different legal terms and each country interprets them differently. It is possible to be US domiciled but not domiciled in any one state. New York may well accept this position (it usually does, even though it's written law could be interpret things otherwise). Domicile is a critical element to your tax status in many countries. I like to describe them this way: Residence is where you physically live. Domicile is where your heart lives.This answer is not a substitute for professional tax advice. T...