Living in One State, Working 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. 

How does working in a different state than I live in affect my tax return? 

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. However, you might also be required to file a state tax return in your state of employment. 

Am I required to file taxes in both 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.  

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 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. 

How can I avoid paying duplicate taxes if I am required to file in both states? 

To avoid paying taxes to your state of residence and state of employment, there is a tax credit that you can take advantage of. If you file a resident and a nonresident state tax return, you should be eligible to claim a credit on your resident tax return. 

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.  

What if I work for an out-of-state employer? 

If you work remotely for a company in another state, you will most likely only have to file a state tax return in your state of residence. Your company’s headquarters should not determine where you pay state income tax. 

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 2019. 


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