Need to file state taxes when you live and work in different states?
Most people in the U.S. live and work in the same state, which makes state taxes pretty easy to understand – you pay taxes to the state where you live and work.
But what if you live in one state and work in another? Do you pay taxes to the state where you live? Where you earn an income? Both?!
You need to pay taxes to both. Most likely you will end up having to file a resident return in the state where you live and a nonresident return in the state where you work.
Resident return
Generally you need to file a resident return in the state where you are a permanent resident. This state has the right to tax ALL of your income, wherever it was earned.
Nonresident return
After you file your resident return in your home state, you then need to go about filing a nonresident return in every other state where you earned money. A nonresident return only taxes you on the money you earned in that state. What often happens is that you withhold some income for each state tax.
Let’s take a real-world example.
Let’s say you live in New Jersey and commute to your NYC job Monday through Friday. Come tax time, you would need to file a resident return in NJ (reporting all of your income) and a nonresident return in NY (reporting only the income you earned in NY).
Worried about being double-taxed? Don’t be. You will have an opportunity to claim a credit for taxes paid to the nonresident state. They will then divide whatever has been withheld between them and the state whose tax liability was not exactly met will either give you a refund or a tax bill.
States without an income tax
There’s always an exception to the rule. In this case, there are seven exceptions. The five states with no income tax and the two states that only tax interest and dividends are the exclusions:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
- Tennessee
- New Hampshire
If you live in one of these states, you don’t need to file a resident return (unless you live in TN or NH and have interest and dividends income). But if you work in a state that does have an income tax you have to file a nonresident return in that state.
The same holds true when the situation is reversed. If you live in a state with an income tax, you must file a resident return there. But if you work in a state without an income tax, you don’t have to worry about filing a nonresident return.
Sound complicated? There’s a reason for that: it is. But let’s not stress because here’s all you really need to know. For this to work, every state needs to make agreements with every other state covering the income they could both theoretically tax. These agreements are structured to generate a minimum amount of paperwork and special cases: instead of having some workers who lives in a state but doesn’t pay taxes, the states have someone who lives in the state and pays taxes like everyone else — but gets a special tax credit at the end of the year.
In a situation like this, it’s often best to talk to your payroll department about how to proceed. In places with many out-of-state commuters (like New York, New Jersey, and Connecticut, as well as cities near state borders), they will have the details on how each state treats out-of-state income.
Even if you have to file multiple state tax returns you can take care of them right here on RapidTax.
Hi, I live in Miami Fl and work in Bowling Green, OH, I’m paying Ohio state taxes, which I know I have too, but I also paying Bowling Green city taxes. am I supposed to pay those too even if I don’t live there?
Hi George,
You were smart to check into this. You are typically only required to pay city taxes if you are a resident of that city. I do suggest contacting the Bowling Green City Hall and explaining your situation to a representative. They should be able to direct you how to proceed in updating this with your employer.
If I live and work in MA as an independent and my company is registered in WY, do I have to file in MA?
Hi George,
Taxes can be tricky when the company you work for is based in a different state than you work. You are responsible for filing a resident state return for the sate you are a resident of (MA) and the state where you earn an income (MA). Unless your company is withholding taxes from your paycheck, you should not need to file a non-resident state tax return for WY. You can see which state taxes are being withheld from on any of your current pay stubs.
Hi,
I am a resident of New jersey and rented an apartment in NJ. My wife and 2 kids stay there. I was working in NJ for 3 months. Now I moved to a new job in Michigan since 2 months. I travel home once in every month. Now I had rented an apartment on share basis in Michigan. I think my employer deducts the tax for both NJ and Michigan as I had provided address of NJ as my Primary Address.
Will I will be double taxed?? Or should I provide Michigan address and only deduct the Michigan Tax.
Or showing New Jersey address will be double tax to me??
How do i go about this situation
Thank you in advance..
Hi Jebu,
Congratulations on the new job position!
I first recommend checking which states your employer withholds taxes from. You can check on any of your recent pay statements. Now you should keep in mind that you are responsible for paying taxes to your resident state and the state where you earn an income. Based on what you’ve stated above, those states are New Jersey and Michigan. If your employer does in fact deduct from both states, then this is accurate. When you file your taxes at the close of the financial year, you will need to file a resident state tax return for New Jersey(since you live there as a resident) and a non-resident state tax return for Michigan(since you earn an income there).
That being said, you may also want to see if you would qualify as a Michigan resident so that you wouldn’t need to put New Jersey into the mix at all. Each state varies slightly with their residency requirements but the rules can be found right on the Michigan Government Website. If you do qualify as a Michigan resident, then you can update your W-4 information with your employer to show your Michigan address and discontinue the withholdings for New Jersey. They will not be able to reverse any past withholding amounts but at least it won’t continue.
I am currently a resident of GA and earn 100% of my income in GA. My wife is based from our home in GA and earns 100% of her income in GA.
I am considering a job in NC that will have me based there M-F and in GA on the weekends/holidays etc.
Do I need to change my residency to NC? How does this impact my filing as my wife and her income will remain in GA with my children? Can I keep my GA license and residency status and file a non-resident filing in NC?
Hi Rich,
Congrats on the possible new job! You’re smart for considering all of the small details with it.
If you decide to accept the position in NC, I would suggest filing a joint federal tax return along with filing your state returns separately. You will still file with a married filing status with this option and reap the benefits. It will just rid you of the complications of possibly being double taxed with a joint state return. Also, you will need to take a look at the residency guidelines for each state because they tend to vary quite a bit. If you are considered a resident of NC with your new living situation, then you will be required to file a state resident tax return. For more information on filing taxes while living in a different state as your spouse, check our other article.
I have residency in Maryland, however I work in Alabama and live in an apartment while here. Should I have income tax withheld from my paycheck in Alabama?
Hi Burt,
Income taxes are withheld from the state where you reside and the state where you earn an income. Unfortunately, in your case, both MD and AL taxes would be withheld.