When Do You Need To File Tax Returns In Multiple States?
Most tax payers only file their tax return in a single state, their home state, or state of residence, also called their tax home. For most, their tax home is also where they live and earn a living. If your state has an income tax, this is where your state tax return must be filed.
But for others, living in one state while working in another and perhaps having property in a third state is becoming more common. Or maybe you moved and worked in two states. Every state has its own rules about how they tax individuals, and those rules can be confusing.
In these cases, you may be a part-year resident, a non-resident or something else. Some states are nice in recognizing other states where you have paid income taxes, a few will tax your out-of-state income even when it was taxed in another state. Every combination of states has different situations. Please keep this in mind as we cover multiple state tax issues. You may also need to dig into the regulations in each state to figure out what should happen, and it may not always appear fair.
First, do your state tax returns in order:
- Your nonresident state(s) and/or any part-year resident states, then
- Your resident (home) state last.
The purpose is to have taxes from the nonresident state(s) flow to the resident state to maximize credits or deductions for taxes already paid in other states.
Even if taxes are not owed, it may be desirable or necessary for taxpayers to file a state tax return to get refunds or to claim business losses that can be carried forward to future years.
Here we explain what you need to do with multiple state tax returns.
Multiple state Filing Requirements
If you don't already know, first see if your state(s) does or does not collect income taxes. See States That Don't Collect Income Tax.
Generally, if the state you reside in has an income tax, you have to file a tax return with that state tax, as well as in any other taxable states where income is generated.
If you're not sure, see if a particular state requires a tax return for income from their state, see State Taxing Agency Contact Information. Often, there will be a minimum amount of income required before you have to file a tax return. Check the rules for your state.
When you have income from multiple states, also see if your states have a reciprocal agreement. See What is a Reciprocal State and How Does That Work?
Having a reciprocal agreement means the two states agree that each will not tax the same income. And yes, there are a very few states where both will do that. Even most states without reciprocal agreements at least allow a credit for taxes paid in another state. Again, check the rules in the states you earned income in.
Moved from one state to another state
If both states have a state income tax and you earned income in both states, you likely need to file a tax return in both states.
- Complete a part-year return for the old state first.
- Then complete a part-year return for your new state.
Part-Year returns generally recognize and tax only the income earned in that state. In the following year, you'll only prepare a resident return in your new home (resident) state. Unless you move again.
For more information, see I Moved to Another State During the Year.
Tip: If the move was work related and you were not reimbursed (you paid for the move), be sure to go through the moving expenses interview in TurboTax to claim any deductions for the move.
In TurboTax, enter moving expenses by:
- Select the Federal Taxes tab (Personal Taxes in TurboTax Home & Business).
- Select the Deductions & Credits button, then select Explore on My Own.
- On the Your 2011 Deductions & Credits page, scroll down to Other Deductions and Credits - Moving Expenses.
- Click Start or Update to begin the moving expenses interview.
Married Filing Joint but each spouse worked in a different state
Generally, you will need to file tax returns for all states that you worked in.
TIP: In certain situations, it may benefit you to file Married Filing Separate (MFS) to completely separate the state taxes. This is not common, but can result in overall tax savings.
Check by completing a separate federal MFS tax return for each person with their state(s). If one persons state of residence is different from the state they earned income in, they may need to complete a return for two states. See Married Filing Joint vs. Married Filing Separately.
How Do I Prepare a Joint Federal Return and Separate State Returns?
There may be several reasons for filing state returns differently than how the federal return is filed. For more information, see How Do I Prepare a Joint Federal Return and Separate State Returns?
For Federal tax returns, see Married Filing Joint vs. Married Filing Separate.
For special situations such as non-traditional relationships, see Preparing Community Property Returns for RDPs or SSMs in California, Nevada or Washington.
For general information on filing status, see What is My Filing Status?
In the military stationed in another state
Military members and their spouses generally file tax returns in their state of domicile. This is their military home of record, or where they enlisted in the military unless it has been changed.
If the military member or a spouse of a military member has non-military income, they may need to file a tax return for the state where they earned that income. For information about the military and taxes, see Military Spouse Residency Relief Act and State Taxes.
I have a business Interest in Another State
If you have a rental home or other business in another state, you would be subject to the tax rules and taxes for that other state. Generally, you need to file tax returns in all states where you have business interests that generate taxable income.
We recommend you complete the tax return for your home state first, then work on any additional states you may need to file.
Next, determine the tax rules and laws for the state you have the business interest or income from. To contact the tax department of your state, see the State Taxing Agency Contact Information.
Once you know the tax rules and income reporting requirements, determine if you are required to report or pay taxes in that state. If so, download the additional state in TurboTax and follow the interviews.