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.
My employer is located in Delaware, and I was a resident of Delaware until August 15th, 2012. I commuted into the office then.
On August 15th, I moved to Pennslyvania and began working 100% from my home office for the same Delaware company.
I’m so confused about the state returns – A coworker mentioned to me on the side that working from a home office in PA for a DE company means I don’t pay any state taxes, but taxes are still withheld from my pay checks (DE for first half of year, PA once I moved).
Any help?
Hi Maureen,
For 2012 you have to file a part-year resident return in both Delaware and Pennsylvania because you moved in the middle of the year. Next year (2013) when you are living entirely in PA, you will only have to file a PA resident return.
I live in NYC (Bronx) but my company is Miami, Fl. When I file my state taxes do I file as a full time resident or a part time resident. And am I required to pay state taxes if my money is made in Fl and not NY?
Hi JC,
If you lived for the entire year in New York (and did not moved sometime during 2012) then you only have to file as a resident in NY. It doesn’t matter where your company is located – and Florida doesn’t have a state income tax anyway.
I live in missouri an i am currently working in florida. can i have missouri state taxes taken out of my check.
Hi Wayne,
You should be able to. Ask your employer if he can start deducting MO taxes.
we live in CA, own a house and everything. my wife is a stay home mom, she has no income. I work for this company that is based in VA, and so i have a VA tax withheld from my pay check…
i go to VA for 4 weeks stayed in a hotel, then go home to CA for 2 weeks, then go to VA again for 4 weeks, then go home again for 2 weeks, and so on and so fort…
Do i have to pay taxes on both states… how do i file my return in VA (non resident?)…
Hi Alex,
Yes you will have to file in both states. You should file a resident return in California that taxes you on all of your income. Then you will have to file a nonresident return in Virginia that taxes you just on the income you earned in VA. Because VA taxes are being withheld from your paycheck, you will be able to claim a credit on your CA return for taxes paid to another state. Hopefully VA will transfer some of this money to CA.
I have a potential lucrative job prospect in FLA. I dont want to relocate my family from MI (especially since my wife has a job and my child has not finished HS) until I know I really like the job. For 2013 I would work in FLA living in apt and work on establishing residency in FLA. I would keep my family in MI and visit every month. Would it be better to declare FLA as my state of residency when I have established residency in FLA and make MI my nonresident state? I would not have to pay state taxes in FLA and just pay property taxes in MI. In a couple of years I would move wife down to FLA and then our main state would be FLA. Does this make sense?
Hi Ron,
Yes it does make sense, although note that for 2013 you would have to file a part-year resident return in MI for the portion of the year that you were still a resident there. The one thing I would caution you about is that residency isn’t quit as simple as “declaring” yourself a resident somewhere. It’s considerably more subjective. You would certainly need to get a FL driver’s license, register to vote there, etc. Be sure to investigate the residency requirements for each state to make sure you are decidedly a FL resident.