Yes, you DO have to pay taxes on income earned outside the US. If your state has income tax you are usually responsible for that as well. If you meet the criteria for an overseas exemption - legally establishing a foreign domicile or staying outside the country for over 330 days out of 365 in a full calendar year - you MAY be eligible to exclude the first $87,500 of your income from federal taxes. This will generally not apply to state taxes and certainly not local or property taxes.