How Will Living and Working in Different States Affect Your Taxes?

Hollis, NH Residents Wonders How New Job Will Affect Her Tax Filing

Living and working in different states can pose an interesting challenge when filing taxes.  In most cases you will need to file multiple tax returns, a resident tax return for that state that you live in and a non-resident return for the state where you work.  Filing two separate tax returns does not mean that you will have to pay two separate tax bills.  On your resident state tax return you will report your tax liability from your non-resident tax return.  All states allow filers to claim a tax credit based on taxes paid to other states.

A Hollis resident had just accepted a new job in Massachusetts.  Concerned about how living and working in different states would affect her taxes, she contacted Merrimack Tax Associates.

Working and Living in Different States May Affect Your Income Taxes

If you live in a state with no income tax and are working in a state that does have an income tax, your earned income will be subjected to this tax.  The exception to this is if you spend time working from home.  You can keep track of the hours spent working remotely, in your resident state that has no income tax.  At the end of the year this income can be deducted, giving you a refund for the income tax paid while working remotely from home.

Spouses Need to File Two Tax Returns

When one spouse works and live in a different state, both will need to file double tax returns regardless of what state your spouse work in.  Both parties will file a resident and non-resident tax return for the state when one works and lives in different states.

The Hollis resident now has a better understanding of what she can expect when taking a job in another state.  She will be better prepared for filing her taxes now that she has this information.