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.
I live in Alabama but worked in both Alabama and Florida, where there is no state income tax. I am assuming that I need to pay on the income earned in Florida, but my return is not showing up as such. How can I be sure I am filing correctly?
Hi Sam,
I would suggest double checking with Alabama state taxation regulations. Here is the link their site; https://myalabamataxes.alabama.gov/_/#1
You’ll have to enter the income earned from Florida sources on your Alabama return, although it may not be taxed considering Florida is a tax free state.
I am a contractor and I moved from Alabama to live and work for a company in Florida from February to mid-June of 2013. My direct employer, however, had its headquarters in Virginia. Then I had to move for work again and from mid-July to end of October I lived and worked in Tennessee for a different company but with the same employer. The employer withheld state taxes for Virginia from my paychecks all this time. From November I lived and worked in Tennessee for the same company (same job) but with a different employer, which physical address in Atlanta, GA as stated on my W2. This new employer did not withhold any state taxes from my paychecks. I really don’t understand what forms I need to file and with which state and I don’t have $100-$200 to go to HR-Block or other agencies to file my taxes. Please help!!!
Hi Julia,
No problem, you can file your taxes on RapidTax for a very reasonable price.
Anyways, basically you will have to file non-resident returns for all the states you received income from but did not live in. You will file a part-year resident return for the states you lived in (and also worked in). As a non-resident of a state, you are only taxed on the income received from sources in that state. If you were taxed by a state that you shouldn’t have been taxed by, you will file a non-resident return for that state as well.
It’s good to know that Florida and Tennessee does not have income taxes, so you won’t have to worry about filing any state taxes for either.
When filing your taxes on Rapid, our application is step-by-step and straightforward. That means, you’ll simply check a box to add income from a state you worked in. If you have any questions while doing so, our support team is standing by via phone, live chat or e-mail to help! Best of luck.
My family and home are in Nevada, but I work less than 3 days a week in Arizona as my sole source of income and my wife works exclusively in Nevada. I have no residence in Arizona, but I did get an Arizona drivers license and register a car that I keep in Arizona to keep the local police happy (which is separate from tax issues… I think). I am on “temporary” job assignment until I am recalled from furlough back to Nevada, but that could be years. I am getting the impression from what I am reading on Arizona law that if I have no residence, have no children in Arizona schools, I am in Arizona less than 50% of the time and I need to file but I am exempt from state income taxes and claim a 100% refund. Arizona non-resident tax forms have me Married Filing Separately, then instruct me include my wife’s Nevada income?
Does any of this make sense?
Hi Jeff,
For state taxes, you will have to file a non-resident return for Arizona. You will be taxed on only the income received from Arizona sources (I am guessing your company is out of Arizona).
Nevada does not have income taxes, which means you won’t have to worry about filing state taxes for Nevada (for you or your wife).
I live in CA but work in Utah. How would I go about paying my tax. Does my employer take out tax for each or either state?
Your W2 will show you what state taxes are being taken out. You will file a non-resident return for Utah and a resident return for CA. As a non-resident of Utah, you will only be taxed on income received from Utah sources.
Hello,
I live in NH, but own a company (llc) in Massachusetts. I work from home in NH. Do I have to pay Mass taxes on the income I make from my company?
Hi Jacob,
Yes, you will be taxed on the income received from Mass. sources. That means you will have to file a non-resident return for Massachusetts.