| Paying state income taxes is never easy, but what if | | | | two states, and only getting the money back once you |
| you work in one state and live in another? If you're | | | | file state taxes for 2 states. They'll be able to set up |
| filing state taxes for 2 states, this is all you need to | | | | your paycheck so you're withholding the right amount: |
| know to get the most out of your filing. | | | | you'll get the right amount of take-home pay, and won't |
| | | | get walloped with extra fines for under-withholding. |
| 1. You mostly owe state income taxes for the state | | | | 4. Work with a tax preparation company just to be |
| where you live. So when you're filing state income | | | | sure. The actual process for filing state taxes for 2 |
| taxes for 2 states, you'll end up deducting what you | | | | states involves filing as a nonresindent in one and a |
| owe from the state where you live from your taxes in | | | | resident in another. It's a little tricky, but can be made |
| the state where you work. | | | | much easier if you just file online with a company that |
| 2. This doesn't mean you won't owe taxes in two | | | | can help with filing 2 state taxes. The process for filing |
| states. For example, let's say you live in a state with a | | | | state taxes for 2 states is also a good time to see if |
| 4% income tax, and work in a state with a 5% income | | | | there are any state-specific deductions you can take. |
| tax, and that you earn $50,000 in a year. You would | | | | That's the process, in a nutshell. Oddly enough, this is a |
| owe $2500 where you work and $2000 where you | | | | lot easier than it could be! Filing state income taxes for |
| live. But the where-you-work state would accept a | | | | 2 states is only possible because the states set up |
| $2000 deduction, so you'd end up paying them $500, | | | | deals with one another: each state makes other state |
| and paying $2000 to the state where you live. In other | | | | income taxes deductible, so they don't end up |
| words, when you're filing state taxes for 2 states, you | | | | double-taxing people who live on the border of two |
| will pay at most what you would owe if you lived and | | | | states. So even though there's some extra paperwork |
| worked in the highest-tax state. | | | | (or a few extra clicks!) around tax time, people filing |
| 3. Ask your payroll department for help early on. If you | | | | state taxes for 2 states can still count their blessings. |
| don't, you might end up withholding all the taxes for | | | | |