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.
well, i think i found the answer. thank you anyway!
Hi Ray,
Glad to hear you found your answer. If you have any other questions regarding filing your taxes, feel free to ask us. Happy tax season!
My husband and I moved with his company from one city to another in GA in October 2013. In October, he started working in FL. I understand that we will just file a resident return for GA and nothing for FL. However, on the federal copy of his W2 box 15 says TOTAL STATE and only has a state income tax listed in box 17. On the GA state copy of his W2 box 16 and 17 are filled in and then on a second GA state copy page (sent separately) it has a different amount listed in box 16 and 17. i have looked online and cannot figure out what to do about TOTAL STATE or the different amounts for the state copies. any advice would be greatly appreciated!! Thank you!
My wife and I own a home in Arizona, this year I worked in Arizona from January to March. In March I took a job in Washington, (which does not have an income tax) where I have been living ever since. My wife is still living and working in Arizona until our son graduates from high school at which point she will move to Washington. My question is do I only file Arizona taxes for the 3 months I was living there and should we still file jointly?
Also it should be noted that on my W2 form my Washington employer shows my Arizona address.
Hi Keith,
Normally, you would have to file a non-resident or part-year resident return for Washington, but you won’t have to considering they don’t have an income tax. I would suggest filing jointly for both federal and state. For your state return, you’ll file a resident return for Arizona (considering you lived there during this year and also worked there part of the year), you will report all of your income received (from both Arizona and Washington).
Hello! I live in Maryland and work full time in Maryland, however last year I earned Miscellaneous Income, non-employee compensation, in Delaware. In reading the instructions, it looks like I can claim it on my 1040 under line 21 (sporadic activity or hobby) as it is not self-employment income or part of my regular job. However, am I required to file a Delaware non-resident return for this income? It is over $600.
Thank you for your assistance!
Hi Jen,
Yes, that’s right as long as it’s a non-business activity you can report it there. If the income is from a Delaware source, than yes you will have to report it on a non-resident return for Delaware.
I moved to Missouri from Wisconsin on 5/10/13. However I purchased a home in Missouri on 2/28/13. I got my Missouri drivers license on 6/20/13. That said, I was asked to continue working remotely which I did until 8/2/13 and then retired. Do I have to pay Misssouri taxes? From what date?
Hi Marge,
For Missouri you will file a part-year resident return. That means you’ll be taxed by Missouri for the time you lived there (5/10/13).
Do I also file a part year resident return for Wisconsin? Do I split the income, i.e. Wisconsin earnings up to 5/10/13 and then Missouri earnings from that date until 8/2/13 (even though I was working remotely for my company based in Wisconsin)? Is this considered Missouri income? Or Wisconsin income?