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Most people in the US live and work in the same state, which can make state taxes pretty easy to understand: you’re earning money, and you’re paying a tax on it. But what if you live in one state and work in another? Are you getting taxed on where you live when you make money, or where you make your money?
What often happens is that you withhold some income for each state tax. For example, if you live in New York and work in New Jersey, you’ll see New Jersey and New York taxes taken out of your paycheck. You’re not being double-taxed, though: when you file, you’ll be able to file as a New York resident and a New Jersey nonresident. Then, on your New York return you can claim the taxes you paid to New Jersey.
If it sounds complex, there’s a reason for that: it is. 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.
Tags: State Taxes
This entry was posted on Monday, June 15th, 2009 at 10:52 pm and is filed under State Taxes.- Unlimited live support.
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Hi Zilvinas,
We use the Akismet plugin for spam filtering, which takes care of the vast majority of spam comments we receive. The ones left over are very easy to manually sort out.
I’m not sure that I agree 100% with your post, but I did find it interesting.
What if you live in a state that has no income tax and work in a state that does? Are you taxed where you work or where you live?
Hi Sheryl,
In this situation, you would file a non-resident state return for the state you worked in. This will only tax the income you earned in that particular state.
I work in Wyoming and live in Idaho. What should I withhold from my taxes fro Wyoming? What should I withhold for Idaho?
Hi Richard,
Lucky for you, Wyoming has no income tax. So you don’t need to worry about witholding any Wyoming state tax. Idaho, however, does have an income tax and Idaho residents are taxed on all income, including that earned out of the state. So you do need to make sure that your Idaho state income tax is being witheld from your paycheck. And of course, don’t forget about federal taxes too!
OK. So here is my situation. I am working in Alaska, live in Colorado and my company is based in Louisianna. They are taking louisian state taxes out. What is the right situation? What state should my taxes be taken out for? I am guessig NOT Louisianna.
Hi Mike,
You will always be taxed in the the states in which you live and work, so you should be taxed in Alaska and Colorado (though lucky for you, Alaska has no personal income tax). You should not, however, be taxed in Louisiana if your company is based there but you don’t work there. But if you own the company, it’s an entirely different tax situation altogether and you could very well be taxed in Louisiana.
I currently work in New Jersey and have an opportunity to live in New York but am concerned about the tax implications of this. Am I going to end up paying more taxes if I live in New York and work in New Jersey. Should I just look for a place in New Jersey and live in the same state I work in?
Hi Dave,
Living in New Jersey might make your tax situation a little simpler, but it probably won’t save you money. It’s true that when you file, you’ll be taxed in both New York and New Jersey. But you’ll be able to claim the taxes you pay in the other state.
I currently live in Oregon and work in California. Do I need to change my withholdings to Oregon or keep them California or both?
Hi Haley,
You will actually be taxed in both Oregon and California. The good news is when you file you should be able to claim the taxes you pay in the other state, which should prevent you from paying much more in taxes than someone who just lives in one state.
I live in Arizona i work from home and work for a company in New York how do i file my state income tax ? do i have to pay in two both states ?
Hi Stephanie,
Don’t worry, you don’t have to pay New York state taxes. You are considered to live and work in Arizona. Therefore, you only need to file Arizona state taxes.
I live in NV (no income tax state) and work in AZ. Do I file a non-resident AZ tax form and claim a credit and refund for the taxes I have paid to AZ?
Sheryl,
That’s correct. You should file in Arizona as a non-resident.
Tax Advisor,
I found some great information on this site – great job! I’m wondering if you could provide some clarification for my situation.
I will be starting a new job soon that will require me to travel and work in different states (similar to a consultant).
The company is based in California, I live in Massachusetts, and will be working in California, Illinois, and Wisconsin. To make it more complicated, I will be relocating to Florida (no state income tax) at the end of June or beginning of July (2012).
My questions are:
1) would I fill out a W4 in every working state and my home state (MA)?
2) during the 2013 tax season, would I need to file state taxes in all four states?
3) even though there may be a tax credit in MA (I believe they do) at the end of the year to recover the “double tax,” is there a way to avoid some of this “double tax” during the year? This causes a personal budget nightmare and would like to minimize this “double tax” throughout the year rather than recovering this amount through a credit at the end of the year. Is this even possible?
4) once I move to Florida, would I recieve a credit for paying taxes while living in a state that does not have state income taxes? Or no because I’m still liable of paying taxes where my income was earned?
Thanks for the help!
My friend’s daughter just moved to California right at the end of 2011 for a new job. She earned just a little more than $200 in CA before the year ended. The rest of her income is from Arizona, and she considers herself an Arizona resident.
No taxes were taken out of her CA earnings, since it was such a small amount. They did take out SS & Medicare.
Does she have to file a CA state return in addition to the AZ return? Or does she claim the CA money on her AZ state tax return?
Any help is appreciated!
Hi Iris,
Technically, yes, she does have to file a nonresident California tax return as well as her normal Arizona return. When she files her Arizona return she should still claim the taxes she paid in California.
Hi!
My husband and I live in LA. He worked in NC for about a month last year. He has two W-2s, one from each state. State taxes were taken out in NC, so would he also have to file state taxes for NC? I do our taxes, and am not sure how to handle this. Thanks for any help you can give me!
Hi Rose!
Yep, your husband has to file taxes in North Carolina. File California taxes as a Resident, and then file as a Nonresident in North Carolina. Normally you have to file a return for every state in which you live and every state in which you earn money. Just be sure to claim the taxes you pay in the other state, so you don’t get double taxed.
Hi!
I live in NYC during the week but work in NJ but my main residence is in Florida where I’m at on the weekends. How does that scenario play-out? Luckily, Florida doesn’t have a state tax but I feel I’m going to get screwed one way or the other.
Thanks,
David
Hi David,
You have to file taxes in Florida as a Resident because you live there, and you have to file taxes in New Jersey as a Nonresident because you earn money there. Unless you earn money in New York as well, I don’t think there’s any reason to file a New York return, based on what you’ve said. Be sure to claim the taxes you paid NJ on your FL return so you aren’t double taxed.
Hi,
I am a legal resident of Colorado, but I have lived and worked as a nurse in Arizona since September. I did not make any money in the state of Colorado at all in 2011 so all of my income came from Arizona. I did not ever change my residency (my driver’s license and nursing license are both from Colorado), so I am afraid this may be a problem now at tax time! Do I only file in Arizona or do I have to file in Colorado, too, even though I have no income there? I never owned a house or anything in Colorado, I just went to school, so I didn’t make any money.
Thanks,
Hilary
Hi Hilary,
This depends whether your move was permanent or not. If it was permanent, then you’ll need to file a part-year return in both Colorado and Arizona. If your move was temporary you’ll have to file as a Colorado resident and an Arizona nonresident. FYI, if your move was permanent, I would take steps to switch your residency to Arizona so you can prove your move was permanent. Otherwise, Colorado could try to claim full resident taxes.
Hi, for the first 2 weeks of 2011 I was living in Virginia, working in DC for a company via a temp agency. The agency is the one who sent my paychecks, with VA state taxes deducted (no DC taxes), and the company’s address is a Georgia address (according to my paychecks). Then I worked in VA for a different company for a few months. In June 2011, I moved to NC and began working there.
Now, when I file my returns, obviously I need to file in Virginia as well as North Carolina, but do I need to file in DC too?? Georgia??
Thanks so much,
Alisa
Hello again, I also meant to ask, when entering “Employer Address” for the temp agency, should I list the Georgia address that’s on my W2, or the address of the company where I actually worked in DC?? Thanks again!
Hi Alisa,
You are correct that you definitely need to file in Virginia and North Carolina. Normally, you would have to file for the state you worked in, but according to the District of Columbia’s website, it does not sound like you have to file for simply working there. Also, you do not need to file Georgia taxes because you did not earn money in Georgia. Merely working for a Georgia company does not require you to file. Also, I would list the address of the temp agency, not the company, as the temp agency was your actual employer.
I live in Tennessee (no state income tax) and worked part of last year on a project in Alabama. Although there is state income tax taken out for Alabama by my company, I expected to get it all back when I filed my taxes because I’m a non-resident. I took my taxes to be done at HR Block and they said that I’ll get some back (about $700) on almost $2300 paid in (on about 54k earned during the time in AL). Does that sound right to you? I was expecting to get the full $2300 back. Thanks!
I am a resident of Florida but work in Michigan. I’ve battled the state of Michigan for 2 years in order to receive 100% of the Michigan State taxes my employer withheld. Finally, I have my refunds. However, I don’t want to keep doing this over and over (having to prove I am a resident of Florida, which has no income tax and thus I don’t have to file state income taxes). What can I do so that my employer will stop withholding Michigan State taxes? It amounts to $4,000 every year. No small change. Thanks.
Hi Michele,
H&R is right, you won’t get all of your Alabama tax back. Living in a state that doesn’t have an income tax does not mean that you are exempt from tax when you work in a state that does have an income tax. It’s impossible for me to know if the $700 you got back is the correct amount, but I can tell you you won’t see all $2,300.
Hi Edith,
It’s actually not true that living in a state without an income tax exempts you from paying income tax when you work in a state that does have one. You do owe Michigan taxes. You’ll probably get some of it back, but not all. If you’ve somehow managed to get 100% of your tax back from Michigan, good for you, but there’s nothing I can tell you to stop having Michigan taxes withheld.
Hi Chris,
Okay, first question: a W-4 is a form that you fill out for every employer, not every state. You should have one W-4 for all the work you do with this company.
Second: Yes, you probably will have to file taxes in all four states. You will definitely need to file taxes as a resident in MA. But if you’re moving to FL, you will probably need to file as a part-year resident. In all likelihood you will need to file as a nonresident in the three other states as well. Most states have a gross income threshold below which you don’t need to file, but they tend to be pretty low bars.
Third: the only way to prevent “double taxation” is to claim the taxes you pay as a nonresident on your resident state’s return.
Fourth: Even though FL does not have an income tax, you still have to pay income tax in the states where your money was earned. You’ll probably get some of it back, but not all of it.
If i live in WV and If have a w-2 that shows that they took out WV state taxes although the Company was in MD and i worked in MD am i still required to file a non resident form for MD?
Hi Christina,
Yes, you need to file taxes as a resident in West Virginia – regardless of whether you earned any income there – and file taxes as a nonresident in Maryland, because you earned income there.
I just moved from MA and bought a house in FL. This will be my primary residence, but I wiillI work remotely for the same company in MA. Can I ask them to stop taking the state taxes out of my check as of now? I don’t want to have to fight to get it back if MA should not have it to begin with.
Hi Ellen,
Yes, you should be able to adjust your withholding and have them stop taking MA taxes out of your paycheck, since you are no longer earning income in the state. But be aware that you will still have to file a part-year resident tax return in MA and they will tax their portion of all your income.
I love in California . Working in Oklahoma . How do o file??
Hi Juan,
You need to file taxes as a resident in California and as a nonresident in Oklahoma.
I live in Illinois and was sent on an assignment to Houston texas for about 11 months, during which I was not deducted Illinios State Tax. I know that texas does not have a State Tax but Illinois does. Should I pay Illinois tax while filling the Tax Returns as I am a resident of Illinois?
Hi David,
Yes, you must file an Illinois tax return. In your resident state (in this case IL) you are taxed on all of your income, regardless of where you earned it.
Hi Advisor,
I live in Chicago IL, worked for a consulting company with projects in NY. I received a W2 with 2 pages: 1 page with my fed and state info showing IL income (equal to total fed income) and IL tax; the 2nd page with same info for fed but NY income (same as in IL income) and a NY state income tax. I am concerned that this will show 100% working in Il and 100% working in NY at the same time. If I enter this as 2 separate W2, would that double my fed income? If I enter as a second entry for box 15-17 on my return W2, wouldn’t the state income for each state be incorrect and over-stated? Should I proportion the income and adjust the W2′s?
Hi Mike,
From what you’ve described, this does not sound like two separate W-2s. If it’s one form from one employer then do not enter it as two separate forms. This would indeed double your income and would be very bad for your tax liability. As for the state tax situation, did you earn any income in Illinois? If not, then your income in each state should be the same. Since you live in IL, you will have to file as an IL resident. In your resident state, you are taxed on all income, regardless of what state you earned it in. In NY you will file as a nonresident and you will only be taxed on the income you earned in NY. If all your income was earned in NY, however, then both IL and NY will appear to be taxing the same amount of income and it may seem like you are being “double taxed.” Don’t worry. When filing state returns you can claim the amount of tax you pay to other states and the tax you owe that state will be adjusted accordingly.
Hi Advisor –
I work in a tax free state – New Hampshire. (lived there as well)
I bought a secondary residence in New York State in 2011.
This past month I have changed legal residency to NYS but I’m still working in NH and have a residence there.
My employer has started to take out NYS income tax from my paycheck.
Are New York State residents taxed on all income, including that earned out of the state?
Thank you… This is one form. I entered the 2 state as 2 entries but somehow the IL state rejected my e-filing. It is very strange.
Hi Don,
All states with an income tax tax their residents on all of their income regardless of where it was earned, not just New York. Only nonresidents are taxed on the income they earn in that particular state.
I live in Texas. I just accepted a job, where I will work 2 weeks a month in Phoenix and 2 weeks at home in Texas. Texas has no income tax. Do I file Arizona tax as non-resident? Do I pay tax in Arizona ONLY for the time I work in Arizona (for example for next 10 month 2 weeks in Phoenix)? or in other words pay Arizona tax for only time I am in Arizona.
Thanks in advance.
Hi Nick,
Yes, you will need to file taxes as a nonresident in Arizona. You will need to pay taxes on all of the income you earn in Arizona – it has nothing to do with the amount of time you spend in the state. But of course, since you just accepted the job, you won’t have to worry about it until next year when you prepare your 2012 taxes.
Hi.. I have a new employee who is working in Louisiana and he lives in Florida, he will stay in an apt while he is working here but he does live in florida.. How should his SUI and State tax be set up in payroll… Thanks!!