# how to establish U.S. residency while residing in Mexico



## Tecolote (Jun 6, 2012)

I'm new to this forum and imagine this question has come up before, but haven't been able to find it.

I live in Oregon, which has a steep flat 9% state income tax. If my wife and I move permanently to Mexico, of course we don't want to have to continue to part with 9% of our income to a state where we no longer live.

What do expats do in a situation like this? Is it necessary for us actually to move physically to another U.S. state that doesn't have an income tax, establish residence there (which would be expensive: traveling there, renting there for a short time, etc.), and then transfer our car registration to that state (again, expensive, new title, etc.) so we'd have that state's license plates? And then apply for that state's drivers' licenses? Wow! :confused2:

I've read about mail forwarding services. Is there any equivalent way of using something like this to establish usable residence in a state that doesn't charge income taxes? But then how would this affect having auto plates from that state? (And as long as we keep our Oregon plates, you have to certify you're an Oregon resident and give the policy number of your U.S. insurance company, which we would surely drop once living in Mexico.)

This is a _main _stumbling block to our moving to Mexico, so any practical suggestions would be most welcome. Many thanks!


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## makaloco (Mar 26, 2009)

If you move permanently to Mexico, why would you need to keep US residence? If it's only for the car, you could probably simplify your life by selling it and buying one in Mexico. If you really want to keep your car, quite a few expats register in South Dakota and you could look into that. Sorry, I know nothing about it, but there have been discussions here, and I'm sure other members will chime in.


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## mickisue1 (Mar 10, 2012)

Is it possible that you are confusing US residency with US citizenship?

All you need to establish your US citizenship in any other country is a valid passport.

If you earn an income in that country, you are still subject to US taxes, but not to the state where you no longer reside.

I'm no expert on them, by any means, but I do know that the IRS takes into consideration taxes paid to the country where you live. Just don't ask me how much consideration, or how, other than generally, it affects what you owe to them.


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## Isla Verde (Oct 19, 2011)

mickisue1 said:


> Is it possible that you are confusing US residency with US citizenship?
> 
> All you need to establish your US citizenship in any other country is a valid passport.
> 
> ...


 I don't have the exact figure at my fingertips, but as of now, any foreign income you earn is not taxed by the IRS unless it is over $90,000 (that's US dollars) per year.


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## conklinwh (Dec 19, 2009)

I think that the base question is how to avoid state taxes if live abroad. Is there someway to establish residence in non income tax state like TN or TX short of having a relative that "you can move in with" for residency purposes and even then, what paperwork if any required to leave state like Oregon.


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## mickisue1 (Mar 10, 2012)

That's the point: if you are not a current resident of the state; no state taxes.


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## sparks (Jun 17, 2007)

conklinwh said:


> I think that the base question is how to avoid state taxes if live abroad. Is there someway to establish residence in non income tax state like TN or TX short of having a relative that "you can move in with" for residency purposes and even then, what paperwork if any required to leave state like Oregon.


That's the point .... no relatives living in states with no taxes? I used a mailbox address for years but banks and credit cards started clamping down. My address is in Wash. state (family) so no tax issues


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## sparks (Jun 17, 2007)

mickisue1 said:


> That's the point: if you are not a current resident of the state; no state taxes.


But do you want to tell the IRS you are a permanent resident of Mexico?


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## Tecolote (Jun 6, 2012)

conklinwh said:


> I think that the base question is how to avoid state taxes if live abroad. Is there someway to establish residence in non income tax state like TN or TX short of having a relative that "you can move in with" for residency purposes and even then, what paperwork if any required to leave state like Oregon.


Conklinwh ~ That's exactly my question. If my wife and I move to Mexico, we won't know in advance that we will stay there permanently, and so wouldn't want to sell our U.S. car and buy a Mexican-registered car. If we went initially on a 180-day tourist card, then upgraded to FM3, we'd still need a state residence to license our American car until we made the decision to become true _imigrados_.

So my basic question is how to avoid U.S. state taxes while living in Mexico until we decide to make Mexico our permanent home.

Thanks for the replies, and hope this helps clarify my question.


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## makaloco (Mar 26, 2009)

sparks said:


> But do you want to tell the IRS you are a permanent resident of Mexico?


Why not? The IRS doesn't really think in terms of "permanent", but I declare my residence and tax home as Mexico and did the same in other countries where I was working. Since the mid-'70s, nothing horrible has ever come of it.

Tecolote (BTW, that's the name of our best beach here), the "permanently" in your first message threw me off. I see what you're trying to do now. It does sound like you'd be best off keeping US residence, but in a state with no income tax.


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## DNP (May 3, 2011)

The OP asked about state taxes, not federal taxes. The IRS is about Federal taxes, not state taxes.

WashDC/SMA


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## conklinwh (Dec 19, 2009)

Tecolote said:


> Conklinwh ~ That's exactly my question. If my wife and I move to Mexico, we won't know in advance that we will stay there permanently, and so wouldn't want to sell our U.S. car and buy a Mexican-registered car. If we went initially on a 180-day tourist card, then upgraded to FM3, we'd still need a state residence to license our American car until we made the decision to become true _imigrados_.
> 
> So my basic question is how to avoid U.S. state taxes while living in Mexico until we decide to make Mexico our permanent home.
> 
> Thanks for the replies, and hope this helps clarify my question.


Easiest would probably be if you hd a relative in a no or very low income tax state where you could use their address to establish residency. As other post said, not clear if a forwarding box in say Texas would work.


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## mickisue1 (Mar 10, 2012)

sparks said:


> But do you want to tell the IRS you are a permanent resident of Mexico?


Why would you not?

Moving to another country is not equal to renouncing one's citizenship.

So long as you are a citizen of the US, you can move back, if and when you choose.


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## Tecolote (Jun 6, 2012)

*expensive complexities*

If I understand what some of you are saying or implying, if my wife and I sold our home in Oregon with the intention, but not the certainty, that we would stay permanently in Mexico, then in order to avoid Oregon state taxes (since we'd no longer be residents) during what might be some years that we're still in temporary mode in Mexico, we'd need to do these things: 

- physically move first to a state like Texas, N. Dakota, or Florida that has no income taxes
- rent an apartment there
- be able to prove to the DMV there that we're residents (utility bill, rental receipt, etc.)
- get new Texas driver's licenses
- transfer our Oregon car insurance to Texas
- transfer the Oregon car title to Texas
- buy Texas license plates
- establish a Texas mail forwarding service

Then go to Mexico without having to pay Oregon taxes, with a valid U.S. driver's license, registration, and plates. We'd meet Mexican driver's license requirements, and could keep our U.S. car until we know we want to stay permanently.

It seems to me that if we didn't do these things, we wouldn't be able to renew our Oregon driver's licenses or plates (since we'd no longer be residents), wouldn't be able to continue to have U.S. auto insurance when we return to visit the States (with no valid U.S. driver's license and plates that may have expired), etc.

It's hard to believe that many expatriots go through all this if they come from a high tax state!  I wonder if there isn't a simpler, less expensive way to get out of a high income tax state during a long trial stay in Mexico, but maybe not.

I haven't seen a discussion of what seems like a predictable package of problems on this forum, but I imagine a lot of intelligent people have found ways to solve them, and would welcome some suggested simpler solutions than the expensive and complicated one above.

Many thanks!


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## Guest (Jun 7, 2012)

Here are explanations of the Oregon tax law:

From the Oregon state government: 
Department of Revenue: Personal Income Tax Which Oregon Tax Form Do I File?

If you own a home in Oregon, and are not selling it when you come to MX, then pay attention to this part of the Oregon law in the above link: Quote:
*Oregon resident living in a foreign country: You are considered a nonresident for all or part of the year if you meet the federal "physical presence" test or "bona fide residence" test for residents of the United States living in a foreign country.* End Quote

Under the federal law they cite, this means either you spend 30 days or less per year inside the US (physical presence test), or else get a MX visa (old forms would be FM-3 or FM-2 and are now called "No Inmigrante" or "Inmigrante" - *but NOT just a tourist visa*) to pass the bonafide residency test in MX.

Here is the explanation of the same thing from OregonLaws.org

ORS 316.027 - Resident defined - 2011 Oregon Revised Statutes

In this OregonLaws.org explanation, under Part (1) (B) - if you maintain a home in Oregon but spend less than 200 days within Oregon, you would not be subject to resident taxes. "Domicile" usually means the place you park your head on the pillow most nights. "Residency" does NOT equal "Domicile".

For your own peace of mind, your questions are probably worth the investment in an hour of an Oregon tax attorney's time.


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## Tecolote (Jun 6, 2012)

GringoCArlos said:


> Here are explanations of the Oregon tax law:
> 
> .....
> 
> ...


GringoCarlos ~ What a thoughtful person you are! It never occurred to me to check my own state's residency requirements. My wife and I will keep this information in mind if we can see a way to maintaining our Oregon home without selling it during a trial period of living in Mexico. We've had very bad experiences with renters, and definitely can't leave the place unoccupied for the 335 day minimum.

And I see potential problems even if we kept the house, since as "nonresidents" we couldn't renew driver's licenses, plates, U.S. insurance, etc. Doesn't that seem correct to you, too?

Again, warm thanks for your insightful and useful response!


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## mickisue1 (Mar 10, 2012)

Check again.

My daughter is NOT a resident of MN, has not lived here for nearly 10 years. 

Her income isn't high enough to pay federal taxes--not by a long shot!

She pays taxes in the country she lives (Italy), and has twice renewed her MN driver's license.

She has a mailing address (ours) for the purpose of getting mail in the US. But she doesn't claim to live here, and yet can maintain her DL.

She, in fact, got an Italian driver's license for the first time last year, in preparation for buying her first car in that country.

I'm sure that each state is different, but a phone call to your DMV might clear things up for you, if your biggest concern is driver's licenses and car insurance.


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## Guest (Jun 7, 2012)

Tecolote said:


> GringoCarlos ~ What a thoughtful person you are! It never occurred to me to check my own state's residency requirements. My wife and I will keep this information in mind if we can see a way to maintaining our Oregon home without selling it during a trial period of living in Mexico. We've had very bad experiences with renters, and definitely can't leave the place unoccupied for the 335 day minimum.
> 
> And I see potential problems even if we kept the house, since as "nonresidents" we couldn't renew driver's licenses, plates, U.S. insurance, etc. Doesn't that seem correct to you, too?
> 
> Again, warm thanks for your insightful and useful response!



I still recommend talking to an Oregon tax attorney to get their opinion if you want to keep your house in Oregon in your own names (see below) and live in MX or some other place outside of Oregon.

I'm not endorsing anything, but FWIW check out this website's FAQs for becoming South Dakota residents, getting a South Dakota drivers license, changing your vehicle plates to South Dakota, mail forwarding services and their reasons for doing these things (their website seems to be off-kilter and you have to scroll right to read their information). Looks like with a motel receipt and their affidavit, you have most of the things you would need to get the drivers license. Cost about $125-$150 per year.

SD Residency FAQ

There are probably MANY companies in South Dakota offering these types of services (Google is your friend). According to their information, to get a South Dakota drivers license you would have to make a quick trip to South Dakota to physically get the license. 
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Regarding your home, not sure but believe that Oregon has very low/no taxes on real estate transfers other than any capital gains/income taxes. If you now own your home outright (no mortgage) you could form a New Mexico LLC (that you own in any name you choose) to buy and own your Oregon home at an advantageous sales price, have a resident agent for the LLC in New Mexico for about $100 a year, keep your names off the new title to your home, using the South Dakota mailing address for the LLC, pay no tax on the "transfer", and on paper have cut your ties to Oregon.

Read more here (this website is geared towards personal privacy, but it would work for you too):

CanaryIslandsPress - New Mexico LLCs

Some gymnastics, but it may pay off for you.


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## DennyDaddy (May 3, 2011)

Hello ...

I am a res of Oregon, live in Mexico on an FM-2 (I do know it has a new name).

As you stated getting a TX address, I bet your an RVer!

Anyway, with Oregon I have a driver
License


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## DennyDaddy (May 3, 2011)

DennyDaddy said:


> Hello ...
> 
> I am a res of Oregon, live in Mexico on an FM-2 (I do know it has a new name).
> 
> ...


+............

Oh heck was timed out and rest was not posted ...not important anyway what I said!


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## RVGRINGO (May 16, 2007)

We live in Mexico & haven't been out of Mexico in years.
We have a TX address, via a mail forwarding service with offices nearby.
We have TX drivers licenses for another few years, and will then get Jalisco, Mexico licenses.
We drive a car registered in Clay County, SD
We have another car, purchased and registered here in Jalisco.

It is all very simple.


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## RVGRINGO (May 16, 2007)

Duplicate glitch.


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## Tecolote (Jun 6, 2012)

RVGRINGO said:


> We live in Mexico & haven't been out of Mexico in years.
> We have a TX address, via a mail forwarding service with offices nearby.
> We have TX drivers licenses for another few years, and will then get Jalisco, Mexico licenses.
> We drive a car registered in Clay County, SD
> ...


RVRingo,

Thanks for your helpful, clear reply. The rules and regulations seem overwhelming at first (maybe you remember?!), so your straightforward reply helps our planning. 

To get your Texas drivers' licenses, did you then have to establish residency in Texas, at least temporarily? (I assume you have to go to the TX DMV in person to get a license.)

My wife and I have the Ajijic area in mind, so maybe someday we'll meet. 

Thanks again for your reply!


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## Tecolote (Jun 6, 2012)

GringoCArlos said:


> I still recommend talking to an Oregon tax attorney to get their opinion if you want to keep your house in Oregon in your own names (see below) and live in MX or some other place outside of Oregon.
> 
> I'm not endorsing anything, but FWIW check out this website's FAQs for becoming South Dakota residents, getting a South Dakota drivers license, changing your vehicle plates to South Dakota, mail forwarding services and their reasons for doing these things (their website seems to be off-kilter and you have to scroll right to read their information). Looks like with a motel receipt and their affidavit, you have most of the things you would need to get the drivers license. Cost about $125-$150 per year.
> 
> ...


GringoCArlos - Thanks very much for your ideas; certainly helpful in our planning. I appreciated the link to SD and understand a little better how the logistics might work. Thank you again!


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## RVGRINGO (May 16, 2007)

Ten years ago, we stopped at the first convenient town in TX and got driver's licences and auto registration just by using a friend's TX address, which was a mail forwarding service that we later used upon getting settled. Then, we've renewed by mail, but are now up to our limit. That approach isn't easy any more, since 'homeland insecurity' was invented. So, in your case, you might want to consider using one of those SD outfits used by people with RVs. You would have to spend a day in SD to do that, but it would solve both the license and registration problem.
The point is, that you don't need to do anything but leave your old state and then get some 'paper' in another; preferably tax free, like TX or SD.


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## Tecolote (Jun 6, 2012)

RVGRINGO said:


> Ten years ago, we stopped at the first convenient town in TX and got driver's licences and auto registration just by using a friend's TX address, which was a mail forwarding service that we later used upon getting settled. Then, we've renewed by mail, but are now up to our limit. That approach isn't easy any more, since 'homeland insecurity' was invented. So, in your case, you might want to consider using one of those SD outfits used by people with RVs. You would have to spend a day in SD to do that, but it would solve both the license and registration problem.
> The point is, that you don't need to do anything but leave your old state and then get some 'paper' in another; preferably tax free, like TX or SD.


RVGringo - Thanks so much for your thoughtfulness and willingness to share what you've learned. (Probably a refrain you've heard before!!)

When you wrote that you're "up to your limit," does that mean that you will have to make a trip to TX to appear in person, or have you thought of getting a Mexican driver's license and just not having a U.S. license (or would this block your ability to drive in the States if you wanted to?).

Thanks again. Certainly much appreciated.


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## Detailman (Aug 27, 2011)

Tecolote said:


> RVGringo - Thanks so much for your thoughtfulness and willingness to share what you've learned. (Probably a refrain you've heard before!!)
> 
> When you wrote that you're "up to your limit," does that mean that you will have to make a trip to TX to appear in person, or have you thought of getting a Mexican driver's license and just not having a U.S. license (or would this block your ability to drive in the States if you wanted to?).
> 
> Thanks again. Certainly much appreciated.


If you check above I believe you will see that RVGringo will obtain a Mexican driver's license and he can drive in the US with that license. He will probably get rid of his US plated car and retain the car he bought in Mexico.


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## RVGRINGO (May 16, 2007)

Detailman said:


> If you check above I believe you will see that RVGringo will obtain a Mexican driver's license and he can drive in the US with that license. He will probably get rid of his US plated car and retain the car he bought in Mexico.


That's the plan; if my eye condition will just allow me to ever drive again!


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## BajaPam (Aug 10, 2011)

I live in Mexico full time and my car is still registered in Oregon. We have a friend there that forwards mail from the DMV but I suppose we could give them our MailBoxes Etc. (mail drop service) address just as easily. 
For many years we just put down the number of our Mexican insurance policy on the OR registration renewal form. When we were "randomly audited" and they said they did not recognize our insurance company (no kidding!) we explained the situation. They asked for a letter clarifying that we reside in Mexico and do not drive in Oregon and everything has been fine since.
We imported one of our vehicles but that was expensive and the insurance is more expensive for a car with Mexican plates so we're not doing that with the others.


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## joaquinx (Jul 3, 2010)

You also have to consider voting. Do you wish to continue to vote in US elections? Do you own property in Oregon?


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## Tecolote (Jun 6, 2012)

BajaPam - What you shared is very interesting: Do you mean that even after your "random audit" by DMV that they _continued _to issue you new vehicle registration renewals -- since you don't drive in Oregon? -- Good old bureaucratically confused Oregon: almost like Mexico! 

I've heard that car insurance is more expensive for Mexican-plated cars. Is this really true? It seems paradoxical to me. Is it because Mexicans, who aren't legally required to carry insurance, don't make up a large enough population of insurance-buying customers to keep insurance rates down? Whereas the number of ****** tourists _is _large enough to do this? I should think the two populations would, despite the number of uninsured Mexican drivers, be in favor of a larger group of Mexicans who do buy insurance. (?)

Thanks, BajaPam, for responding. It would be encouraging if we could keep renewing our OR car registration yet not reside here. I admit to wondering whether the good fairy was looking out for you. 

-- joaquinx - If my wife and I move to Mexico, we'd sell the house and wouldn't then own any property in Oregon. 

As for voting, I'm not convinced that our 2 little votes make a great deal of difference to the U.S. or the rest of the world, so am ambivalent about the importance of being able to do this. (And the questionable quality of the candidates -- my humble view -- may make voting a good deal less important.)


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