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.
Hello,
Here is my question.
I just recently moved to Florida and I am looking for a job. I am a Maryland resident and I have not changed my residency over yet because I still own a house in Maryland and I do not want to change my residency until the I am sure the job department works out.
So if I end up taking a job but I am still a Maryland resident, will Florida take out state income taxes and send them to Maryland until I claim residency in Florida?
Hi Steve,
Yes, you can let your employer know that you are a resident of Maryland so that they will deduct Maryland taxes from your paycheck.
Hello,
I am a resident of Texas. I relocated at the end of 2012. I work for a company that is based in Georgia. For 50 (non consecutive) days in 2013, I traveled to and worked physically out of our office in Georgia. The other days I spent working remotely from my home in Texas. My employer has withheld Georgia state taxes for the entire 2013 year. Am I required to pay Georgia state taxes for the entire year, just for those 50 days or not at all (in which case am I entitled to a refund)?
Thank you.
Hi Samuel,
You are required to pay tax on your income from Georgia sources. That means, you will file a non-resident state return for Georgia, reporting the income earned from Georgia sources.
Thank you for responding. So, contrary to some other advice that I have received, it does not matter where I reside. What matters is where my employer is located?
hello my name is maria. I work in Virginia but 2 years ago I moved to md, and I didn’t change my address in my job.my va withholding is $1068. do I have to pay md taxes?
Hi Maria,
It depends what address you list as your address on your return. If your main address is the Virginia address, you will have to file a resident return for Virginia and only pay Virginia taxes. If you list your main address as your MD address, you would have to file a MD resident return and a non-resident return for Virginia. Meaning, you would have to pay MD taxes.
My husband is a green card holder, we live in MN but he still works for his Canadian employer remotely. I am filing our federal taxes married filing jointly and using the foreign tax credit. We are full year residents in MN this year. When I complete the return I’m including both of our incomes, however, it looks like we owe MN money because it’s making us pay MN tax on my husband’s Canadian income. I looked at using form M1CR to receive a credit but it says you can only request a credit if you have paid tax to both Canada and MN for this income. We haven’t already paid tax to MN for the Canadian income, but it doesn’t seem right that we would have to pay tax to them, if he’s paid the tax to the Canadian federal and provincial governments. Not sure what to do at this point….
Hi, just a follow up that I called the State of MN revenue department and they said to fill out M1CR – that before we complete Form M1CR the MN state tax return is requesting payment from us, so that is considered the MN tax paid. In other words, if we didn’t fill out the form we’d be paying it. Whew!
I am thinking of moving to Nevada and working remotely to my company in Illinois. I will be visiting Illinois quite often to work there. Come tax season do I have to file taxes for Illinois as well as Nevada? Is there a cut off day that someone is considered a resident of Illinois?
Hi Kevin,
Nevada is an income tax free state. That means, if you are a resident of Nevada and working for a Illinois company, you will file a non-resident return to Illinois and report your Illinois income. As a non-resident of Illinois you would only be taxed on your Illinois income.