In today's mobile society, it is not uncommon for people to live and work in more than one state. A couple or family may spend part of a year on the West Coast and part in the central states, for instance, and maintain homes in two states. Sorting out taxes in such situations can be complex. Federal tax rules will be uniform, but state laws and regulations vary widely and you could wind up with dual taxation unless you take proper precautions. You may need consultation with an accountant or a tax agency to avoid costly mistakes.
You'll pay property taxes in the state and county where a residence is located, regardless of whether you live there full time or not. If you own houses in both California and Arkansas, for instance, you'll pay California real estate taxes on one and Arkansas taxes on the other. If you rent in one state, the rental will cover those for you. Real estate taxes usually are assessed and collected by a county, under state laws.
Income taxes vary by state and some states, like Florida, Texas and Washington, have no income tax. Generally, however, you will be taxed on all income earned in a state. If you earn money in both states where you live part-time, you generally will pay taxes on the portion of income earned in each state. In some states, you may be required to report all income, but will be given credit for that earned or taxed in another state.
Part-time residents must follow the rules of each state, but this can be very complicated. You may, for instance, earn income in one state while living in the second state. Or you may get income from the second state while living in the first. You may have to work out an apportionment percentage, depending on how much time you spend in each state, to divide the income
You must check each state's laws on what constitutes a resident. New York, for instance, defines a resident as someone who lives there more than 183 days, about six months. However, California says you must file an income tax return if you would owe $1 or more in tax, depending on your income. California and other states impose a non-resident tax on income earned in the state by people who are not fulltime residents.
You should check the specific regulations and laws for each state in which you live part-time, whether it is just during a relocation or permanent. Online tax preparation companies usually provide information for every state on whether you need to file an income tax return and how to report your income.
- TurboTax: Figuring What's Owed When You Live and Work in More Than One State
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- Planet Payroll: Multi-State Taxation Issues
- USA Today: Working in Different States Requires Filing Non-Fesident Income Tax
- Berdon LLP: Dual Residency
- California Tax Service Center: New To California
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