Filing Taxes When you Live in One State and Work in Another

Woman filing with TaxSlayer on her work commute.

If you work in one state and live in another, taxes may not be straightforward. You might be required to file in multiple states. Similarly, if you move during the year or have an internship or clerkship for a few weeks in another state, you may be required to file in more than one state. 

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 will need to file a tax return in your resident state reporting all income you earn, no matter the location. You might also be required to file a state tax return in your state of employment or any state where you have a source of income.

Note: There are nine U.S. states that do not charge income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. If you earn income or live in one of these states, you will not be required to report and pay income tax to that state.

Do I have to file taxes in two states? 

Sometimes states will have an agreement with other states that it borders. These states have what is known as a reciprocal tax agreement in place. If your state and the state you work in have a reciprocal agreement, you might not be required to file two state tax returns. 

If your states do not have reciprocity, you will need to file two state tax returns: one resident and one nonresident.  

How do I know if my states have a reciprocal agreement? 

Each state has its own laws and forms regarding reciprocity. Read this article to see if your states have a reciprocal agreement. 

What is a nonresident state return? 

Unlike a normal state tax return, also known as a resident status, or a part-year resident state tax return, being a nonresident means you have not lived in the state you earn income in for any part of the year. File this when you only work in the state and you don’t live there. 

How can I avoid paying duplicate taxes if I am required to file in more than one state? 

When you file multiple state income tax returns, your income will be taxed once by the state where you earned the money, and again by the state where you live. But, you should be eligible to claim a credit on your resident state return for the taxes paid to the states where you are not a resident. 

What if I moved states during the year? 

If you permanently moved to another state during the tax year, you will be required to file two state returns, one for each state you lived in. You might be able to claim part-year residence, which will allow you to divide your income between the two based on date instead of paying taxes twice.  

Where do I file state taxes if I work for an out-of-state employer? 

Expect to file state tax returns for both states. You’ll file and pay as a nonresident for the state where you work, and as a resident for the state where you live.

Can I still file jointly if my spouse worked in a different state than I did? 

Yes. Report only your income on the state return which you work in and only your spouse’s income on the state return which they work in. Then report both of your income on your resident state return. You can do this while filing married filing jointly. 

What if I am in the Military and am stationed outside of my resident state? 

Military members choose a state of legal residence. This means that they are exempt from paying taxes to the state where they are stationed. They pay taxes on their income to their state of residence. 

What if I am in the Military and my spouse is not? 

Since 2009, military spouses are allowed to claim the same state of legal residence as their partner, and therefore usually file one state tax return. 

Read also:  4 Tips for Filing Taxes on Your Own in the Military

The information in this article is current through tax year 2020. 

 

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