If you work in one state and live in another, you might be required to file more than one state income tax return. This is common for remote employees, but it also applies to employees who cross a state border to get to the office. Other circumstances, like moving during the year, could also affect which state you’ll file in.
Where do I file state taxes if I live and work in different states?
If you earn income in one state while living in another, you should expect to file a tax return for the state where you are living (your “resident” state). You may also be required to file a state tax return where your employer is located or any state where you have a source of income.
It’s important to note that if you live or work in one of the nine U.S. states that do not charge income tax, you probably won’t be required to file a return for that state. States that do not charge income tax include: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Do I have to file taxes in two states?
Federal law dictates that two states are not allowed to tax the same income. If the states do not have reciprocity, then you’ll typically get a credit for some or all of the taxes withheld by your work state. This is often referred to as the Credit for Taxes Paid to Another State. See how this credit works with TaxSlayer.
It’s important to note that many states tax income at different rates. If your home state’s income tax rate is lower than your work state – or vice-versa – the credit may not cover the full amount of state tax you paid.
For example, if your home state has a 3% income tax, and your work state has a 5% income tax, your credit amount will offset the 3% tax imposed by your home state. The remaining 2% will still be paid to your work state.
Do I have to file taxes in two states?
If you’ve determined that you need to file two state returns, your first step will be to figure out your residency status in each state. If you moved from one state to another, you’ll likely file as a part-year resident in both states. If you lived in one state but worked in another, you’ll generally file as a resident in your home state and a non-resident in the state where you worked. Each state’s tax forms will guide you on reporting income earned while you lived there or income that you earned from a source in that state.
Next, you’ll complete the appropriate tax forms for each state. For your non-resident state, you’ll typically file a return to report and pay taxes on income earned there. For your resident state, file a return reporting all income earned that year, regardless of where it was earned. Most states offer tax credits, so you aren’t taxed twice on the same income. Be sure to check state-specific requirements, as each state may have unique rules or forms.
How to avoid double taxation when filing in more than one state
Federal law dictates that two states are not allowed to tax the same income. If the states do not have reciprocity, then you’ll typically get a credit for some or all of the taxes withheld by your work state. This is often referred to as the Credit for Taxes Paid to Another State. See how this credit works with TaxSlayer.
It’s important to note that many states tax income at different rates. If your home state’s income tax rate is lower than your work state – or vice-versa – the credit may not cover the full amount of state tax you paid.
For example, if your home state has a 3% income tax, and your work state has a 5% income tax, your credit amount will offset the 3% tax imposed by your home state. The remaining 2% will still be paid to your work state.
How to file taxes if you moved states during the year
If you permanently moved to another state, you’ll need to file two state returns: one for each state you lived in during the tax year (assuming both states charge income tax).
You may be able to claim part-year residence, which will allow you to divide your income between the two states instead of paying taxes twice.
What’s the 183-day rule for residency?
The 183-day rule is a guideline used by many U.S. states to determine residency for tax purposes. It generally says that if you spend 183 days or more in a state during a calendar year, you’re considered a resident of that state for tax purposes, regardless of where your primary home or domicile is located.
The 183-day rule applies to statutory residency, which is different from domicile (your permanent legal home). You can still be considered a resident of one state under domicile rules while being a statutory resident of another based on the amount of time you spent there.
If you’re designated as a statutory resident according to the 183-day rule, you may owe state income taxes on all your income, regardless of where you earned it. Non-residents, on the other hand, only pay taxes on income earned within the state.
Be sure to let your employer/HR department know when you move to a new state, and ask about adjusting your state income tax withholdings to avoid an unexpected tax bill when you file your return.
How do I file state taxes if I work remotely for an out-of-state employer?
When you’re a fully remote employee, you should expect to file one tax return for the state where you live and one for the state where your company is based (where you are earning money).
Like traditional employees, remote employees typically pay income tax to their resident state. But Arkansas, Delaware, Nebraska, New York, and Pennsylvania apply something
called a “convenience of employer” test to determine how remote workers’ wage income should be taxed. If 1.) your company is based in one of these states and 2.) it is determined that you are working remotely out of state for your own convenience, then your income could be taxed by your employer’s state under this convenience test.
Can I still file jointly if my spouse worked in a different state than I did?
You can file your federal income tax return jointly and report your combined earned income. For state taxes, you’ll report both of your incomes on your resident state return (if your state charges income tax). In addition, you’ll file a separate return for the state where you/your spouse works and report only the income earned in that state.
If you and your spouse live in separate states, it’s important to check the specific rules and regulations in your state to understand what’s permitted. In Virginia, for example, you can’t file a joint return if one spouse is a resident and one is a nonresident (mixed residency).
What state do I file if I’m in the military and stationed outside of my resident state?
Military service members have a “legal domicile” or state of legal residence (SLR). This is where you will pay state income taxes. If you are stationed somewhere other than your SLR, you are exempt from paying taxes to that state unless you are earning civilian income in addition to your military pay.
Military spouses may be allowed to claim the same state of legal residence as their partner, but they must meet certain requirements.
