You can be a resident of two states but you may want to avoid it.
If your life mostly involves just one state, filing state taxes is relatively simple. When your life involves more than one state, things can get complicated pretty quickly.
Everything depends on residency. It determines where you have to file, what kind of return you have to file, and how much you’ll be taxed. The problem is, determining residency is more complicated than it sounds. The states have convoluted and differing definitions of what constitutes a resident.
Generally, you can only be a full resident of one state. Most filers who spend time in two states end up filing a resident return to one state and a non-resident return to the other.
Is this even possible?
Yes, it is possible to be a resident of two different states at the same time, though it’s pretty rare. One of the most common of these situations involves someone whose domicile is their home state, but who has been living in a different state for work for more than 184 days. In a situation like this it is conceivable that you could be the resident of two states.
Filing as a resident in two states should be avoided whenever possible. States where you are a resident have the right to tax ALL of your income. This is regardless of where it was earned. If you are a resident of two states, you will likely end up paying more in state taxes than if you were a resident of just one, or a resident of one state and a nonresident of another.
Check the definitions
The first thing to do if you think it’s possible that you could qualify as a resident in more than one state is to check the definitions of residency. Each state has its own definition of who constitutes a resident. It’s possible that, according to the exact definitions of the law, that you aren’t actually a resident of two states.
Generally you are considered a resident if your domicile is that state, or (if your domicile is another state) you maintained a permanent place of abode in that state and spent more than 184 days there during the year.
Most state tax authorities have a page explaining what exactly constitutes a resident in their state. If you can’t find a page on their website, try checking the tax return instructions themselves. Most include a section on residency.
Make sure you aren’t a nonresident
If you only worked in a state, or lived there for a brief amount of time – in a vacation home, for example – you likely aren’t a resident. In this case, you’d only file as a resident in your normal home state. You would then file as a nonresident in the other state only if you earned money there.
Make sure you aren’t a part-year resident
If you move from one state to another during the year, you’ll file as a part-year resident in both states. You’ll be treated as a resident of each state for only the days that you lived in that state. This will help you to avoid being double-taxed. Don’t make the mistake of filing as a resident in both states if you permanently left one state and moved to another.
Exemptions for students, military personnel, expats, etc.
Most states also have exemptions for students who attend college out-of-state as well as members of the military and their spouses who often have to move from one state to another. These people are generally considered residents of their home states.
For more information about filing taxes in two different states, please refer to this blog post. And don’t forget, you can always file a return for multiple states with the help of RapidTax.
Hello,
My daughter was born and raised in California and graduated there. She also did her first year of college. We recently moved to Arizona and she moved with us and she obtained an Arizona Drivers license. She is currently back in California going to school and living with her boyfriend. She has nothing in her name there and did not reapply for Drivers license in California. She is our dependent and will be moving back to Arizona after school. She is considered a non resident at school in California. She recently started working in California part-time and temporary. So…would she file her own taxes? or would she still be our dependent as she has been and is considered of her Financial aid? But her income was from California?
Hi Michelle,
According to the IRS, a dependent is defined as either a qualifying child or a qualifying relative. To be a qualifying child, a student must meet four tests:
1. Relationship. The child must be the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of any of them.
2. Age. The child must be under age 19 or a full-time student under age 24 at the end of the year. To be considered a full-time student, the child must be enrolled for the number of hours or courses the school considers to be full time and must be a student for at least five months during the year.
3. Residency. The child must live with the taxpayer for more than one-half of the year. The child is considered to live with the taxpayer while he or she is temporarily away from home due to education, illness, business, vacation or military service.
4. Support. The student cannot have provided more than one half of his or her own support.
If your daughter meets these requirements as well as the other general dependency tests that she always has prior to college, then claiming her as a dependent should not be a problem.
i was born and raised in Texas, i moved to California for 5 years and became a resident, now I’m back in Texas, do i have to apply again to become a resident, since i was one before i moved to California.
Hi Raylynn,
There is a slight difference between being a state resident and being a resident for tax purposes. Being a resident for tax purposes has little to nothing to do with things pertaining to your driver’s license, where your car is registered, etc. It has more to do with how long you have been permanently living in the state and how if your plan to move or not. For tax residency, you do not need to necessarily apply but if you are not committed to living in the state for a consistent and substantial period of time, then chances are you are not a resident. Each state varies with residency requirements so I do suggest checking out Texas’ Department of Taxation/Revenue website.
My wife and I live in Laramie, Wy. She just started a new job there. We came from Ohio where we lived the last 8 years.
We rent an apt in Laramie and consider it our full time residency. We also are renting an apt in Denver Colorado that we go to on one weekend a month for pleasure. I am retired. Will we have to pay income tax in Colorado? I know we will have to deal with Ohio and Wyoming, but what about Colorado?
Hi Richard,
Although states tend to differentiate with their rules for tax, the general rule is this. You are responsible for income tax in your state of residence and your state of employment (unless the state is income-tax-free). Based on what you have stated above, OH was your past state of residence and WY is your current state of residence. Your wife’s state of employment is WY. Colorado falls under neither employment or residence. This is not to say that other taxes may apply. However, you should not be help liable for Colorado income tax.
If I buy property in VA and I currently live in WV, could I transfer my car over along with my drivers license while I work in WV as a state employee?
Hi Joseph,
The rules are slightly different for each state when it comes to your license. For Virginia, you must have it transferred within 60 days of becoming a state resident. HERE is the website page listing the other guidelines you must consider.
We have sold our Oregon home and are moving into our motorhome and will be living in nevada for approximately 6 months then back to an rev park in oregon. What must we do to retain our oregon drivers license and car licenses? How do we change our address on our old? We plan to get a po box. Can we use that for a legal address? Thanks
Hi Terry,
When it comes to your legal address, it must be a street address. PO boxes are not considered residential/legal addresses, but there are mail forwarding services in many states which will give you the required street address so you can check with Oregon for this. In order to obtain your drivers license for Oregon, you should contact the DMV in that state. They will most likely need you to visit the DMV in person to make these final changes but I’m sure there is initial paperwork that can be mailed in.