Navigating U.S. Tax Filing for Americans in Israel: Choosing the Right Address on Form 1040
As a U.S. citizen living in Israel, filing your annual Form 1040 can feel overwhelming. Between complying with the Foreign Account Tax Compliance Act (FATCA), reporting foreign bank accounts (FBAR), and balancing U.S. and Israeli tax laws, there’s a lot to manage. One detail that often trips up expats is the address you list on your Form 1040. Many mistakenly believe they must provide a U.S. address, but this choice can lead to unexpected state tax issues. In this blog post, we’ll debunk that myth, explore the risks of state tax assessments based on your Form 1040 address, highlight U.S. states where this isn’t a concern, note that tax-free states like Florida, Texas, and Alaska generally don’t cause problems for expats, and discuss the option of using a relative’s address in a tax-free state.
The Address Myth: Do You Need a U.S. Address?
A common misconception among U.S. tax filers living abroad is that they must list a U.S. address on their Form 1040. This belief often stems from the assumption that the IRS requires a domestic address for correspondence or that a foreign address might complicate the filing process. However, this is simply not true. The IRS fully accepts foreign addresses on Form 1040, and as a U.S. citizen living in Israel, you can—and often should—list your Israeli address. For example, if you live at 123 Rehov HaShalom, Tel Aviv, Israel, that’s the address you should use on your return.
Listing a U.S. address, such as a family member’s home or a P.O. box, can create problems, especially if that address is in a state with an income tax. Many Americans in Israel continue to use a U.S. address out of habit or convenience, but this decision can inadvertently signal to state tax authorities that you maintain ties to that state, potentially triggering a tax assessment.
The Hazard of State Tax Assessments
The address you list on your Form 1040 matters because certain U.S. states—like New York, California, and Illinois—use it as a starting point to determine whether you’re still a resident for tax purposes. These states have aggressive tax authorities that may interpret a U.S. address as evidence of “domicile” or statutory residency, even if you’ve made Aliyah and have no plans to return to the U.S.
For instance, if you previously lived in New York and list a New York address on your Form 1040 (perhaps your parents’ home where you receive mail), the New York State Department of Taxation and Finance might assume you’re still a resident. New York considers you a resident if you maintain a permanent place of abode in the state (like a family home you can access) and spend more than 183 days there in a year. Even if you don’t meet the 183-day threshold, listing a New York address could prompt the state to demand a state tax return. If you don’t respond, you might face penalties, interest, or even a tax lien.
The same risk applies to other high-tax states like California and Illinois. California’s Franchise Tax Board is known for pursuing former residents, especially if they see a California address on your Form 1040 or if you maintain ties like a driver’s license or voter registration. Illinois can also assert residency if they believe you haven’t fully severed ties with the state.
The consequences of a state tax assessment can be severe. If a state like New York, California, or Illinois determines that you owe state taxes, you could be liable for taxes on your worldwide income—including what you earn in Israel. Unlike the IRS, which offers benefits like the Foreign Earned Income Exclusion and Foreign Tax Credit to avoid double taxation, many states don’t provide similar relief. You might end up paying taxes twice on the same income: once to the IRS (after applying exclusions) and again to the state. Fighting a state tax assessment can also be a challenge, requiring you to prove you’ve fully severed ties with the state through documentation like your Israeli lease, utility bills, or employment records. You’ll need to have a translator translate the Hebrew documents into English.
A Safer Approach: Using Your Israeli Address or a Relative’s Address in a Tax-Free State
To minimize the risk of state tax assessments, the best option is to list your Israeli address on your Form 1040. This clearly signals to both the IRS and state tax authorities that you’re living abroad and have no intention of maintaining residency in a U.S. state. Using your Israeli address reduces the likelihood that a state like New York or California will try to claim you as a resident.
Alternatively, if you prefer to use a U.S. address for convenience, it’s generally safe to use an address at a relative’s house in a tax-free state. For example, if you have family in Florida, Texas, or Alaska, you can list their address on your Form 1040 without worrying about state income tax implications, as these states don’t impose a personal income tax (more on this below). This can be a practical solution if you want to ensure that correspondence from the IRS, such as a refund check, is sent to a U.S. address where it can be easily received and forwarded to you.
However, there are practical considerations to keep in mind when using your Israeli address. If you’re expecting a refund, the IRS will mail your refund check to your Israeli address, as they do not deposit refunds directly into Israeli bank accounts. This means your refund check may take longer to arrive, and you might face international banking fees when depositing it. To avoid delays, you could set up direct deposit to a U.S. bank account if you still maintain one. The U.S. bank account must be in the name of the taxpayer; for a joint return, the account must list both spouses as account holders to ensure the IRS can process the deposit. Alternatively, you can deposit the check into an Israeli account that accepts U.S. dollar transfers, though you should confirm with your bank that they can process the payment without excessive fees.
States Where This Isn’t a Problem: The No-Income-Tax Advantage
If you previously lived in a state with no income tax—or if you choose to use a relative’s address in one of these states—you’re in a much better position. Nine U.S. states do not impose a personal income tax on residents: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you list a relative’s address in one of these states on your Form 1040, you don’t have to worry about state tax assessments based on your address, because these states don’t tax personal income at all. Notably, tax-free states like Florida, Texas, and Alaska generally don’t cause problems for expats, as their tax authorities have no incentive to pursue former residents for income taxes.
For example, if you use your sibling’s address in Texas on your Form 1040, the Texas Comptroller of Public Accounts won’t pursue you for state taxes. The same applies to Florida, Alaska, or any of the other no-income-tax states. This can provide significant peace of mind, as you won’t need to worry about severing state residency ties or fighting a state tax audit.
That said, even in no-income-tax states, you might still face other taxes, such as sales or property taxes, if you maintain assets or a home in the state. Additionally, you’ll still owe federal income taxes on your worldwide income, so filing Form 1040 remains a requirement.
Additional Considerations for U.S. Citizens in Israel
Beyond the address issue, there are other tax-related considerations for Americans in Israel. Under the Intergovernmental Agreement (IGA) between the U.S. and Israel, Israeli banks are required to issue Form 1099 to U.S. citizen customers and transmit this information to the IRS. This means the IRS has visibility into your Israeli financial accounts, so it’s critical to report all foreign accounts on your FBAR and, if applicable, IRS Form 8938 (required for large financial balances). If you invest in Israeli keren neemanut and/or teudot sal that you’ll need to deal with onerous PFIC (form 8621) reporting requirements and additional taxes.
If you’re receiving an Israeli pension, be aware that it’s taxable on your Form 1040. The Social Security Administration (SSA) also has access to your tax returns. Previously, if you were receiving Social Security benefits, the Windfall Elimination Provision (WEP) might have adjusted your benefits based on the value of your Israeli pension. However, as of March 18, 2025, the Social Security Fairness Act repealed the WEP, along with the Government Pension Offset (GPO). This means that your Social Security benefits will no longer be reduced due to your Israeli pension, providing a financial benefit for many U.S. citizens living abroad who rely on these payments.
Finally, if you’re new to Israel after making Aliyah, you’ll likely need to establish new banking relationships and choose a tax professional to assist with both U.S. and Israeli tax compliance. A tax professional with experience in cross-border taxation can help you navigate these complexities, ensuring you file correctly and avoid surprises from either the IRS or a U.S. state tax authority.
Conclusion: Make an Informed Choice
Choosing the right address on your Form 1040 as a U.S. citizen in Israel is a critical decision that can impact your state tax liability. Don’t fall for the myth that you need to list a U.S. address—the IRS accepts foreign addresses, and using your Israeli address can help you avoid unwanted attention from state tax authorities in places like New York, California, or Illinois. Alternatively, it’s generally safe to use an address at a relative’s house in a tax-free state like Florida, Texas, or Alaska, as these states don’t impose personal income taxes and generally don’t cause problems for expats.
Keep in mind that the IRS won’t deposit refunds directly into Israeli bank accounts, so plan for a mailed check or set up direct deposit to a U.S. account if possible. If you opt for direct deposit, ensure the U.S. bank account is in your name; for a joint return, the account must list both spouses as account holders. Working with a knowledgeable tax professional and staying informed about your tax obligations will help you navigate these challenges with confidence, ensuring you remain compliant while minimizing your tax burden. With the recent repeal of the Windfall Elimination Provision, you can also rest easier knowing your Social Security benefits won’t be reduced due to your Israeli pension.
Disclaimer: This blog post is for informational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional for guidance tailored to your specific situation.