Most Americans will owe state taxes where they live. 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.
Taxes when living in one state but working in another
Most taxpayers must file a tax return that includes all income in the state where they live. If they work in a different state, they might have to file a return for that state with only the income they earned there. For example, assume a taxpayer lives in New Jersey but commutes to New York for their job from January to March, but from March to December they worked from home in New Jersey because of the pandemic. The taxpayer will file a non-resident New York state tax return for their wages from January through March. And they will file a resident New Jersey state tax return from March through December.
The taxpayer will get a credit for the taxes they paid to New York for that short period of time. This is how taxpayers who worked in one state but lived in another have typically filed their returns. The only difference is the time the taxpayer physically worked in a different state was significantly shorter.
How to file taxes if you lived in two states
First, all states have requirements for residency and generally require the taxpayer to live in that state for 180 days (some states vary). They may also have requirements including:
- Registering to vote in that state
- Obtaining a driver’s license in that state
- Physical residence in that state
- Intention to be a resident in that state
Before taxpayers begin to file taxes, they should check the residency rules for each different state they’ve lived in. Some states vary on when they consider taxpayers full-time residents.
As an example, if a taxpayer lived in Virginia and moved to Florida during the year, the wages they earned during the time they lived in Virginia were taxed until the day they officially moved to Florida. After they moved, they began paying taxes to Florida and ceased paying Virginia state tax.
The taxpayer will have to file two part-year resident returns for the length of time they lived in each state. Check the rules for each state on what income to report. Income from interest, dividends, and pensions is sometimes divided between the two states based on the months in each state.