State residency refers to the state you consider your permanent home and plays an important role in determining your state tax obligations. Your state of residence may tax your income, while other states where you work or earn income may also have filing requirements. Factors such as where you live, how much time you spend in a state, and where you maintain personal and financial ties can help determine your residency status. Understanding these rules can help you file your taxes accurately and avoid potential tax issues.
How to determine your state residency for tax purposes
Determining your state residency for tax purposes usually starts with identifying your domicile, or the state you consider your permanent home. States may look at factors such as where you live, where your family resides, where you work, and where you maintain your driver’s license, voter registration, and other personal ties. The amount of times you spend in a state can also matter. While some states use a 183-day threshold as part of their residency rules, requirements vary by state.
If your resident state collects income taxes, you must file a tax return for that state. This applies to all states, except the nine states that don’t collect income taxes – Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
You may have a unique state tax situation if you did not live and work in the same state all year. These circumstances may require you to file nonresident or part-year state returns.
Your residency may be less clear if you move to another state midyear, split your time between two homes, or work remotely from a different state. For example, if you move from Ohio to Florida in July, you may need to file a part-year resident return in Ohio. If you maintain a home in New Jersey but spend significant time in New York, you could meet New York’s statutory residency requirements even if you consider New Jersey your permanent home. Similarly, working remotely from another state may create additional tax obligations, depending on the circumstances.
Who would be considered a non-resident?
A nonresident is someone who earns income in a state where they do not live. For example, if you live in one state but temporarily work in another state for part of the year, you may be considered a nonresident for tax purposes in the state where you worked. Even if your stay is short, the income you earn while working in that state may be subject to state income tax.
Depending on the state’s tax rules, you may need to file a nonresident state income tax return to report the income you earned there. Understanding your filing requirements can help you avoid potential penalties and ensure you pay the correct amount of tax. If you worked in more than one state during the year, it is a good idea to review each state’s requirements to determine whether you need to file additional returns.
How do I establish residency in a state?
Establishing residency, also known as domicile, in a state for tax purposes generally involves making that state your permanent home. This often means more than simply living there for a period of time. Factors such as where you maintain a home, register to vote, obtain a driver’s license, work, and maintain personal and financial ties may help determine your state of domicile. If you move to a new state, taking steps to establish these connections can help demonstrate your intent to make it your permanent home.
Some states also consider how many days you spend within their borders when determining residency. The 183-day rule is a common benchmark used by certain states, but it does not apply universally, and the specific requirements vary by state.
Can I have dual state residency?
Yes, it is possible to be considered a resident of two states during the same tax year. Dual residency occurs when two states consider you a resident for tax purposes, often because you maintain a home in one state while spending significant time in another. This may happen if you relocate but keep your previous home, split your time between states, or have personal and financial ties to more than one state. Residency rules vary by state, so you may need to establish residency in a new state while ending your residency in your former state.
To establish residency in a new state, you may need to take steps, like getting a state driver’s license, registering to vote, updating your mailing address, and establishing your primary home there. For tax purposes, each state may tax income earned within its borders, and a state may tax your income from all sources if it considers you a resident. Depending on each state’s rules, you could owe taxes to both states, although tax credits or other relief may be available to help prevent double taxation.
When do I need to file a nonresident state return?
You must file a nonresident return for any state where you earned income but did not reside. This applies to more situations than physically working in another state.
Earning income in a state you don’t live in is the bottom line – whether the income is from rental properties, partnerships, S-corporations, trusts, estates, gambling winnings, etc. In addition to the nonresident return(s), you must also file a return for your resident state if it collects income taxes.
This may apply to commuters who cross state lines to get to work. Individuals working remotely for employers in states outside of their resident state may also need to file nonresident returns.
Do I need to file a part-year state return?
Individuals who lived in multiple states throughout the tax year (e.g., if you moved from one state to another) are required to file part-year resident returns for each state. Filing correctly helps ensure you report income earned while living in each state and avoid paying more state income tax than necessary
TaxSlayer makes it easy to file multiple state returns. We guide you to help you select what type of state return you need to file.
