Introduction: Expat Tax Louisiana Planning for British Families in New Orleans
The expat tax Louisiana position looks gentle at first sight, because the state now charges a single flat rate of 3%. However, the headline hides three features that matter to a wealthy British household. Firstly, Louisiana gives no credit for tax paid to a foreign country, so UK rent and UK gains bear state tax on top of HMRC's charge. Secondly, Louisiana is a community property state, which changes who reports what. Thirdly, the state's retirement exemption only begins at age 65. Consequently, the real cost depends on your income mix, your marriage and your age.
At TaxYork, we prepare federal, Louisiana and UK returns for British energy executives, shipping and port leaders, physicians, university researchers, investors and company owners across New Orleans, Metairie, Baton Rouge, Lafayette and Lake Charles. In our experience, newcomers assume a 3% state is too small to plan around. Therefore this expat tax Louisiana guide explains each rule, the form behind it and the evidence it needs.
Expat Tax Louisiana Basics: Two Layers and No Local Income Tax
A British family in Louisiana faces two income tax layers only. Federal tax reaches worldwide income, relieved by the foreign tax credit on IRS Form 1116. The state then charges 3% on a base borrowed from the federal return. Notably, neither New Orleans nor any parish levies its own income tax. Meanwhile, HMRC keeps taxing UK rent and UK property gains throughout.
Who This Guide Is Written For
This guide addresses high-net-worth British nationals, dual national US UK families and accidental Americans living in Louisiana, plus Louisiana-domiciled Americans working in London. Specifically, it suits senior people in energy, petrochemicals, maritime trade, healthcare and the university sector, together with retirees, investors and business owners holding UK property, pensions, ISAs or company shares. If that describes your household, the expat tax Louisiana rules below decide how much of your UK income the state reaches.
How Louisiana Compares With Our Other State Guides
Louisiana sits between its neighbours. Next door, Texas has no income tax but shares Louisiana's community property system. In contrast, Georgia charges 4.99% and also refuses a credit for UK tax. Further north, Iowa charges 3.8% yet credits foreign tax against it. As a result, the expat tax Louisiana picture is a low rate with almost no relief for UK income.
How Louisiana Taxes High Earners
Louisiana taxes high earners at one rate on federal adjusted gross income, less a large standard deduction. For expat tax Louisiana purposes, that simple design is recent. Therefore older guides and many online calculators still show rates that no longer exist.
The Expat Tax Louisiana Flat Rate
Louisiana charges a flat 3% from the 2025 tax year. The Department of Revenue's 2025 resident return instructions confirm that Act 11 of the 2024 Third Extraordinary Session replaced the old graduated schedule, which peaked at 4.25%. At the time of writing, 3% remains the rate for 2026. Consequently, a $2 million earner and a $200,000 earner face the same marginal rate.
The Starting Point and the Standard Deduction
Louisiana begins with federal adjusted gross income, taken straight from Form 1040. It then allows a standard deduction of $12,500 for single filers and $25,000 for joint filers. The same reform repealed the old personal and dependency exemptions. Moreover, federal itemised deductions barely count. Louisiana now recognises only medical expenses that exceed the federal standard deduction. Hence mortgage interest, charitable gifts and UK taxes deducted federally do nothing for the state bill.
No Special Rate for Capital Gains
Louisiana taxes capital gains at the same 3% as salary. Previously, the state offered a deduction for gains on the sale of a Louisiana business held for five years. However, the 2025 instructions limit that deduction to sales perfected before 1 January 2025. Furthermore, it never covered a UK company. Therefore a gain on UK shares, a UK business or a London flat enters the Louisiana base in full.
Sales and Property Taxes Do the Heavy Lifting
Louisiana funds its low income tax with high consumption taxes. The state sales tax rose to 5% in 2025, and parish rates lift the combined figure in New Orleans to roughly 10%. In contrast, property tax is modest. Parishes assess a home at 10% of market value, and the homestead exemption removes the first $75,000 of that value. As a result, a wealthy family's total state burden often comes more from spending than from income, and any expat tax Louisiana budget should include both.
Louisiana Residency, Domicile and Part-Year Moves
Louisiana taxes residents on all income, wherever they earn it. The instructions state plainly that residents "are taxed on all income, regardless of where the income was earned". Accordingly, residency is the first question in any expat tax Louisiana review.
Domicile and the Six-Month Rule
Louisiana treats you as a resident if you are domiciled there. In addition, Louisiana Revised Statutes 47:31 deems a person resident who maintains a permanent place of abode in the state or spends more than six months of the year there. Domicile means your true, fixed home. Therefore a Briton on a three-year assignment with a leased house in Uptown is a Louisiana resident, whatever their long-term plans.
Part-Year Residents Can Choose Their Return
Louisiana gives part-year residents an unusual choice. The instructions allow them to file a resident return or a non-resident return, "whichever is more beneficial". Broadly, the non-resident Form IT-540B confines the charge to income earned while resident and Louisiana-source income. Consequently, a UK gain realised before the move date can stay outside Louisiana altogether. Timing the disposal of UK assets around arrival is therefore the most valuable expat tax Louisiana planning step.
Louisiana Domiciliaries Working in London
An American who keeps a Louisiana domicile while working in London stays within the state's reach. The instructions warn that a temporary absence does not change domicile. You must abandon the Louisiana home and establish a new one by clear actions. However, there is some comfort. Because the state starts from federal adjusted gross income, the federal exclusion claimed on Form 2555 flows through. In 2026 that exclusion covers $132,900 of earnings. Nevertheless, a banker's bonus above that figure remains exposed, and UK tax on it earns no Louisiana credit.
Expat Tax Louisiana and the Missing Foreign Credit
Louisiana gives no credit for UK tax. This single rule drives most of the expat tax Louisiana cost for a family with British assets. Moreover, the state's own instructions say so in terms.
What the Instructions Say
The credit on Schedule C covers income taxes paid to other states only. The 2025 instructions add: "You may not claim credit for taxes paid to cities or foreign countries." Furthermore, even the other-state credit applies only on a reciprocal basis. Therefore UK income tax, UK capital gains tax and Scottish income tax all fall outside the relief.
Why the Treaty Does Not Help
The US-UK tax treaty binds the federal government, not the states. Its list of covered taxes names federal income taxes only. Hence Louisiana is free to ignore the treaty's credit article. However, one indirect benefit survives. Income that the treaty removes from federal adjusted gross income never enters the Louisiana base. For example, a UK government service pension paid to a British national who is not a US citizen is usually exempt federally, and so escapes the state as well. A treaty position of that kind needs disclosure on IRS Form 8833.
The Federal Deduction Offers Little
State income tax is deductible federally, but only within the SALT cap. For 2026 the cap is $40,400. Importantly, it shrinks by 30% of income above roughly $505,000 and falls to a $10,000 floor. Consequently, most high earners recover almost none of their Louisiana tax through the federal return. In practice, the 3% on UK income is a final expat tax Louisiana cost.
UK Rental Income, Property Gains and ISAs
UK investment income suffers the clearest double charge. Each category below reaches the federal return, the Louisiana return and, in two cases, HMRC. Accordingly, the expat tax Louisiana outcome differs by asset.
UK Rental Income
HMRC taxes UK rent first, under the non-resident landlord rules. The federal return then taxes the same profit, with a credit for the UK tax. Finally, Louisiana charges 3% with no credit. Additionally, the two countries compute profit differently. The United States allows depreciation on the building, whereas the UK restricts mortgage interest relief to a 20% credit. Therefore the Louisiana base, which follows the federal figure, is often lower than the UK profit.
Selling a UK Property
A UK property sale triggers three charges. HMRC taxes non-residents on UK residential property gains at 18% or 24%, with a return due within 60 days. The federal return taxes the dollar gain at up to 20%, relieved by the credit. Louisiana then adds 3%. Moreover, the 3.8% net investment income tax applies federally, and current law allows no foreign credit against it. As a result, the combined rate on a London flat can approach 31%.
ISAs and UK Funds
An ISA has no tax-free status in America. The federal return taxes its interest, dividends and gains each year, and Louisiana follows. Because the UK charges nothing, no credit exists at either level. Furthermore, UK funds and investment companies held inside the wrapper are usually passive foreign investment companies. Each one needs IRS Form 8621, and the punitive federal computation feeds into the state base. Missed reporting on an ISA or investment account is among the most common expat tax Louisiana errors we correct.
UK Pensions and the Age 65 Exemption
Louisiana offers one meaningful relief for pensioners, and its wording is broader than most states use. For expat tax Louisiana planning, the detail matters, because the exemption turns on the federal line where the income appears.
How the $12,000 Exemption Works
Louisiana exempts up to $12,000 of annual retirement income for each taxpayer aged 65 or over. Act 11 doubled the figure from $6,000. On a joint return, each spouse claims separately, provided each is 65 and each receives retirement income. The instructions define that income as distributions from a pension or annuity that you report on the pension lines of Form 1040. Notably, nothing in that wording limits the relief to American plans. Therefore a UK occupational pension or SIPP drawdown reported on those lines appears to qualify. Nevertheless, you must name the payer, so keep the UK scheme statements.
The UK State Pension
Under the treaty, a US resident's UK State Pension is taxable only in the United States. Louisiana separately exempts Social Security benefits that the federal return taxes. However, that exemption points at the federal Social Security line. A UK State Pension is normally reported as pension income instead. Consequently, it looks to the $12,000 exemption, not the Social Security one. The guidance on claiming the State Pension abroad also confirms that payments to America receive no annual increase.
Under 65 and Lump Sums
A pensioner below 65 receives no Louisiana exemption at all. Similarly, the $12,000 ceiling does little for a large lump sum. A $400,000 pension commencement lump sum that is taxable federally costs $12,000 in Louisiana tax, less at most $360 of relief. Therefore the year of withdrawal, and your residence in that year, shape the expat tax Louisiana result before you draw benefits.
Community Property and the Married British Couple
Louisiana is one of nine community property states. Broadly, income that either spouse earns during the marriage belongs equally to both. For expat tax Louisiana purposes, this affects separate returns, mixed-nationality couples and UK assets brought into the marriage.
Separate Returns Split Everything
Spouses who file separately must each report half of the community income. IRS Publication 555 sets out the rules and requires Form 8958 to show the allocation. Moreover, Louisiana belongs to the smaller group of states where income from separate property is generally community income. Hence rent from a London flat that one spouse owned before marriage may still be split. Louisiana law lets a spouse reserve that income by a formal declaration, but few newcomers know to make one.
When One Spouse Is Not a US Taxpayer
A special federal rule applies where one spouse is a non-resident alien. Under section 879 of the Internal Revenue Code, earned income belongs to the spouse who performed the services, despite state law. Other community income follows the spouse with the property right. Therefore a British executive whose husband remains UK resident reports the whole salary, not half. Getting this wrong produces mismatched returns in both countries, and it is a recurring expat tax Louisiana error.
Foreign Accounts Under Community Property
Community ownership widens the foreign reporting net. Each spouse with a financial interest in UK accounts above $10,000 in aggregate must file the FBAR with FinCEN. In addition, IRS Form 8938 applies once a joint US-resident couple holds more than $100,000 of foreign assets at year end. A missed FBAR is easier to resolve before the IRS writes, so check both spouses' positions. Our FBAR and FATCA reporting service covers each form.
Deadlines, Estimated Payments and Penalties
The expat tax Louisiana calendar differs from the federal one. A 2025 return is due on 15 May 2026, a month after the federal deadline. Furthermore, the state grants an automatic six-month extension, to 16 November 2026, with no form required.
Payment Is Still Due in May
The extension covers filing only. Tax unpaid after 15 May attracts a delinquent payment penalty of 0.5% a month, capped at 25%, plus interest. Meanwhile, a return filed after the extended date suffers 5% for each 30 days, again capped at 25%. Therefore estimate the liability in May, even if UK figures remain outstanding.
Estimated Tax on UK Income
UK rent, ISA income and gains carry no Louisiana withholding. Consequently, for expat tax Louisiana purposes, a family with substantial UK income should make quarterly estimated payments or raise payroll withholding. Otherwise the state charges an underpayment penalty, computed on Form R-210R. The Louisiana Department of Revenue publishes the vouchers and the online payment route.
Case Study: An Energy Executive in New Orleans
The following illustrative expat tax Louisiana case shows how the layers combine. James, 52, is a British green card holder who runs a division of an energy group in New Orleans. His wife Claire, also British, lives with him in Uptown. Both became Louisiana residents in 2024.
The Income
In 2026 James earns $620,000 in salary and bonus. The couple also receive $63,000 of UK rental profit and $28,000 of dividends and gains inside their ISAs. In addition, they sell a London buy-to-let flat for a gain of $180,000. Federal adjusted gross income is therefore $891,000, of which $271,000 arises in Britain.
The Louisiana Bill
Louisiana allows the $25,000 standard deduction and charges 3% on the remaining $866,000. The state tax is $25,980. Of that, $8,130 relates to the UK income. HMRC has already taken about $9,300 on the rent and about $42,000 on the gain. Nevertheless, Louisiana credits none of it. Moreover, at this income the SALT cap has fallen to its $10,000 floor, so the federal return offers no real relief.
The Federal Layer and the Lesson
Federally, the foreign tax credit covers the 20% regular tax on the gain and part of the tax on the rent. However, the net investment income tax of about $10,300 on the UK income remains. Additionally, the ISA income bears full federal and state tax with no credit. Had the couple sold the flat before moving in 2024, the $5,400 of Louisiana tax on the gain would not have arisen. Similarly, a correct community property allocation would matter if they ever filed separately. Accurate expat tax Louisiana preparation would have flagged both points in year one.
How TaxYork Can Help
TaxYork provides comprehensive US-UK tax return preparation, including expat tax Louisiana compliance, for wealthy families with a Louisiana connection. Specifically, we prepare the federal Form 1040, the Louisiana IT-540 or IT-540B, and the UK Self Assessment return together, so the three sets of figures agree.
Expat Tax Louisiana Returns Prepared as One File
Our team reconciles UK rental accounts to the federal schedule, computes the foreign tax credit by basket, and carries the result into the state return. Furthermore, we document the retirement exemption with the payer details Louisiana asks for. We also prepare Form 8958 allocations for couples who file separately. For treaty claims, our treaty relief and foreign tax credit service supports every position with the correct disclosure.
Catching Up on Missed Returns and Reporting
Many British arrivals discover gaps after their first year. Missed US tax returns, a missed FBAR, or missed reporting of a pension, investment account or ISA can all be corrected. Where the failure was non-wilful, the IRS Streamlined Filing procedures may apply. Likewise, we bring missed UK tax returns up to date with HMRC. Our cross-border tax preparation service then keeps both countries aligned each year.
Conclusion
The expat tax Louisiana regime combines a low 3% rate with very little relief for British income. Louisiana taxes residents on worldwide income, credits no UK tax, and saves its one pension exemption for those aged 65 or over. Furthermore, community property rules reshape separate returns and widen foreign account reporting. However, the part-year election and careful timing of UK disposals can remove a real slice of the cost. Ultimately, the families who fare best are those who prepare the federal, state and UK returns as a single exercise.
Contact Us
If you hold UK property, pensions, ISAs or company shares and need expat tax Louisiana returns prepared, speak to our team before your next filing deadline. You can book a consultation through our website, email hello@taxyork.com or call 020 3488 8606. We prepare returns for clients in New Orleans, Baton Rouge and across the state, as well as for Louisiana-domiciled Americans in the UK.
Disclaimer
This article provides general information only and does not constitute tax, legal or financial advice. Tax rules in the United States, Louisiana and the United Kingdom change frequently, and their application depends on your individual circumstances. Figures are illustrative and reflect our understanding of the law at the date of publication. You should obtain professional guidance from a qualified US-UK tax specialist before acting. TaxYork accepts no liability for actions taken in reliance on this article.