Living and Working in Different States Can Be a Tax Headache

Living and Working in Different States Can Be a Tax Headache

resident of virginia

Alaska, Florida, South Dakota, Nevada, Texas, Washington and Wyoming do not collect income tax. If you live and work in those states, you don’t have to file an income tax return in those states. This is true even if your employer’s physical headquarters are in a high tax state. One of these tax returns can be filed to claim the Child Tax Credit even after the filing deadline. In fact, families who don’t owe taxes to the IRS can file their 2021 tax return and claim the Child Tax Credit for the 2021 tax year at any point until April 15, 2025, without any penalty. It totals ten percent of the federal earned income tax credit for which a taxpayer is currently eligible.

Part-year filers are not usually entitled to out-of-state credits, because they have already subtracted other states’ income in computing Virginia taxable income. However, there are some instances in which an out-of-state tax credit may be appropriate, such as when an individual receives income from another state after moving to Virginia. In that case, you should attach a statement to the return, explaining that the income was received during your period of residency in Virginia. All four of these states have very stringent residency definitions compared to other states, and they tax worldwide income. In most cases, you would need to report all income on your state tax return and pay taxes to the state, even if you didn’t live in the state during the year. If you were formerly a resident of one of these states, it won’t matter whether you’re a resident or have an income at all—you won’t be taxed either way.

The major exception to this rule is if you work in a state with reciprocity agreements. Reciprocity agreements are mainly a midwest and east coast phenomenon. They allow employees to withhold and file only in their state of residence. Thomson Reuters keeps an updated list of all states with reciprocity agreements. If you moved to a state and had income , you will need to prepare a state return for that state.

Taxpayers should speak with their tax professional to see if their state has a reciprocity agreement. Another reason you may have to file taxes in multiple states is if you lived in one state and moved to another during the same year. For example, if you and your spouse were residing in Maine and decided to move to Florida to escape the cold, you may have to file multiple state tax returns. State income tax reciprocity depends on the states, and if your wages are your only source of income. In the case where two states do have an income reciprocity agreement, your employer is obligated to provide you with the withholding exemption request forms for the nonresident state. Free Worry-Free Audit Support is available only for clients who purchase and use H&R Block desktop software solutions to prepare and successfully file their 2022 individual income tax return .


Instead, you will pay all of your taxes in your home state. However, make sure you submit an exemption form with your employer, so they know to withhold taxes from your paychecks by your work state. However, you usually don’t have to pay taxes in both states. Instead, the state where you work will most likely collect income taxes, and not the state where you live. If this is your situaiton, the tax return for the state where you work will be a nonresident return. In that state tax return, you will list only the income earned and taxes paid in that state.

How Can I Avoid Paying Duplicate Taxes if I am Required to File in More Than One State?

A few states require that you propeller industries all your income for the year to that state if you are a resident at the end of the year. If you have to report some of that income to your old state as well, you may be worried that you are paying double state tax on that income. Military personnel are subject to special residency rules.

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We can help you make sure you pay what you owe and get back what you don’t. Your W-2 and other end of the year statements will clearly outline who you paid taxes to. If you paid someone you shouldn’t have, simply file a return in that state requesting a refund. If you didn’t pay a state where you do owe, calculate the amount of tax due and file a return with a payment. Now let’s say you move to Pennsylvania but keep your job in Maryland.

How Do You File Taxes If You Lived in Multiple States?

And with more employees able to work virtually, many of them now have few restrictions on where they can call home. Again, this will heavily depend on whether the state at issue has a part-year residence status. The Military Spouse Residency Relief Act was passed in 2009. This legislation has largely eliminated the problem of dual taxation for servicemembers and their spouses. New Jersey Governor Chris Christie repealed his state’s reciprocity agreement with Pennsylvania in 2017, but it was later reinstated. Each of the fifty states have different laws and government regulations.

  • It is possible to be an actual resident of Virginia and a domiciliary resident of another state.
  • This is an optional tax refund-related loan from Pathward, N.A.; it is not your tax refund.
  • Line balance must be paid down to zero by February 15 each year.
  • Transferring funds from another bank account to your Emerald Card may not be available to all cardholders and other terms and conditions apply.

Sticky states generally consider moving abroad as a temporary leave of absence unless you can remove your ties to the state. These states only recognize a change to another state as a change in residency. This makes it critical to set up new residency in an income-tax-free state before moving abroad.

Determine If You’re a Resident of the State for Tax Purposes

After your move, you will most likely file a part-year resident return in both states. You will have to file a state return depending on where you received income, be it standard wages, self-employment, or property income. The general rule of thumb is that you need to file taxes where you earned the money.


But your home state should give you a tax credit on your resident return for taxes you pay to another state, thanks to the Supreme Court decision. State income tax reciprocity is when a taxpayer lives in one state but works in another. The two or more states involved agree to exempt the income earned by non-residents from a nearby state. To file your part-year resident tax returns, you’ll need to know not only your total yearly income but also how much you earned while living in each state.

Others will start taxing you after you earn a certain dollar amount. When taxpayers work in a different state from where they live, they generally owe taxes to the state where they work as well. When they move to a new state it can be even more complex.

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If you deal with states that all enjoy reciprocity agreements, nothing will change but your address. Let’s say you work in Maryland but live in West Virginia. Thanks to reciprocal agreements, you would pay your taxes to West Virginia where you live.

Appropriate residency dates must be entered for each spouse. In this situation, the full-year resident will not be allowed to subtract income from other states, and will not be required to prorate personal exemptions. If the couple chooses to file separate Virginia returns, the full-year resident must file on Form 760.

This course is not open to any persons who are currently employed by or seeking employment with any professional tax preparation company or organization other than H&R Block. The student will be required to return all course materials. This is an optional tax refund-related loan from Pathward, N.A.; it is not your tax refund. Loans are offered in amounts of $250, $500, $750, $1,250 or $3,500. Approval and loan amount based on expected refund amount, eligibility criteria, and underwriting.

The tax situation isn’t all that complicated if you keep good records. Write down the exact date of your move and tuck the information in a safe place until tax time. It looks like we’re having some trouble accessing your Credit Karma account. We’re working hard at getting everything back up and running, so check back soon to access your free credit scores, full credit report and more.

  • This is the case if your employer withheld state taxes in the state where you worked but didn’t live.
  • At the end of the year, you’ll have to file taxes in both your old and new state as a part-year resident.
  • Let’s say you’ve lived and worked in New York for years.
  • True, it can sometimes be complicated for a temporary visa holder to correctly determine their state tax residency status.
  • Optima Tax Relief’s award-winning staff of tax professionals provide comprehensive tax relief services that can help with almost any IRS and state tax issue.

Whatever the reason you do it, your taxes can get complicated if you live in one state and work in another. By providing my email I agree to receive Forbes Advisor promotions, offers and additional Forbes Marketplace services. Please see our Privacy Policy for more information and details on how to opt out.

If you’re an independent contractor and operate in multiple states, you may have to pay state income taxes to the states you work in. The more states you conduct business in, the more difficult and time-consuming it could be to file your state tax returns. This is why seeking out help from tax preparation services is important. Our experts at Community Tax will help you with income tax preparation, so you can have peace of mind knowing all bases are covered, no matter how many states you do business in. The reason why we say you usually don’t have to pay taxes in multiple states is because some states have reciprocal agreements. This means that two states have an agreement with each other that allow you to work in a neighboring state without being subject to taxation.