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.
Hi
I had to get NY driver’s license because I’m going to wotk in NY but I live in NJ. Is it a problem having NY driver’s license and living in NJ at the same time?
Thanks
Hi Andriy,
When it comes to taxes, your residency is not only determined by your driver’s license. It has to do more with the intent of where your “permanent domicile” is. In your case, it sounds as though your permanent residence is still NJ.
Hello,
I am moving to California from Virginia from June till around November/December to help/stay with a dying family member until she passes as she was just given roughly 6 months to live. I have been working in VA since for all of 2015 leading up to now but I will not be working in CA, I will staying with family and taking care of a loved one. In your opinion, should I file for residency since Im not 100% sure how long I will be there and will I run into any problems tax wise if I only worked all of 2015 in VA and will not have any income in CA for 2015? Thanks for your time.
Hi Akira,
I am sorry to hear about your family member.
When it comes to taxes, each state has their own residency requirements so you won’t typically be able to choose your residency. According to California’s guidelines, you aren’t considered a resident for tax purposes if you are ‘present in California for a temporary or transitory purpose’. That being said, you will need to look into Virginia’s residency guidelines as well, however it seems as though you will need to only file a state return for Virginia this year.
Hi I live in NY and own property in SC I plan on building a house in SC for retirement in 6years I have a CDl liscence in NY .
Can I claim residency in SC an my wife claim NY residency since she has a state job so we don’t get beat up with non resident taxes in SC
Hello Jerry,
This is a smart idea, however there are several points that you want to have in check before updating any tax forms. First, you’ll want to see if you can be considered a resident of South Carolina. You will also want to do the same for your wife for New York. Each state varies with their residency requirements but you can always visit the state government websites to make sure. Next, you want to make sure that you can prove that you are a resident of each state. The last thing you want is the IRS knocking on your door, unless of course you can show them some sort of paperwork that proves you are a resident. The last step is to update your tax forms, the first one being your W-4 form. You’ll need to specifically update the address change.
Another word of advice is to keep in mind that a married couple can file a joint federal return while filing separate state tax returns. In your situation involving two different resident states, you may want to explore this option come tax time.
Hi
My husband and I live in Nebraska. We bought our retirement home in Georgia that doesn’t have inheritance tax. I am going to be living there and he will visit on vacations. I am going to help care for my father currently under hospice care. Will Nebraska require me to pay inheritance tax when I don’t reside there?
Hi Joni,
I am sorry to hear about your father.
You should not be issued a tax bill for the Nebraska inheritance tax. Nebraska taxes property that is left by deceased Nebraska residents or by non-residents who owned the property. Your father’s inheritance only applies to Georgia according to what you’ve stated above and there is no inheritance tax in that state. On top of that, there is also a tax exemption for close relatives inheriting from someone in the state of Nebraska. The inheritor must be receiving more than $40,000 to be susceptible to the tax.
hello
I intend to change my NY drivers license to NJ which requires me to have a proof of address. I will still live in NY afterwards. I am not working at the present time but hopefully will soon in NY . My husband works in NY too. will filing our tax in NY be a problem, i will use my NJ license as an identification.
So in other word i will have 2 addresses but live only in one. Please help. Thank you
Hi Augustine,
It will not be a problem. A driver’s license does not determine your residency. Instead, the state you spend the most time in during the year is considered your resident state.
Good luck on your job search in NY!