Having to file your taxes in more than one state can be a complicated process. The first step is figuring out how much income tax you owe for each state. A lot of people think that they only need to pay the higher amount, but this isn’t always true. You may have a credit or offsetting deduction that makes it worthwhile to calculate what you owe for each state and then compare them before filing in both states.
1. Differences Between a Resident and Non-Resident Tax Filing Status
The state you live in considers you a resident if your intention to stay there is indefinite. You are also considered a resident of the state where your spouse and kids reside even though it may not be the same as where you currently live (if they’re with you most of the time).
If neither one of these applies, then you are considered a non-resident and only have to file taxes in the state where you currently live.
If both apply, then things get complicated because it doesn’t always make sense for your filing status to be determined by the state where you work or receive income from business activities. You should go with whichever one benefits you more.
2. Understand How to Report Income from Multiple Jobs on Your Taxes
If you work in-state and out of state, then things get a little more complicated. The best thing to do is maintain accurate records so that it’s clear which income should be reported where.
In the case that your total taxable wages are higher than $117,000 (married filing jointly) or $73,800 (single) then you will need to file taxes in both states.
In any other case, you only go where the total taxable wages are higher and use that state’s income tax rate when filling out your return there. You can report all of your W-G from outside jobs on a separate Schedule NEC – Other State Income line with the specific amount of income you earned there.
You can also take a deduction for the taxes paid on your out-of-state work as an itemized deduction to even it all out and avoid paying more in one state than another.
3. Are You Eligible for Deductibles or Credits that Could Lower Your Taxes?
There are a number of deductions that you can take advantage of on your tax return to reduce the taxes owed. You should compare these with what is available in each state and go with whichever means more money back for you.
Some examples include:
- Charitable donations (don’t forget about non-cash items)
- Medical expenses above a certain threshold
- Moving expenses to a new state for work or study purposes
- Property tax deductions (for people who own their own home)
Not all of these will be available in every single state, so you should do your research and see if any apply. The more you can deduct the lower your taxes owed are going to be.
4. Review What Counts As Income When Determining Eligibility for Certain Deductions
You may think that the amount of money you made in a certain state is what’s counted as income for your tax return, but this isn’t always true.
The most common example would be refunds from overpayments on property taxes or home loans. These are not taxable as long as they were deducted from previous returns and will lower how much you owe.
If this happens, make sure to include it on the required schedule where income from out-of-state jobs should be declared. You can also claim any deductions associated with that money if applicable.
For other types of income like bank interest or dividends, each state might have different rules about how much is counted as taxable income. It’s best to double-check with the Department of Revenue or Treasury in each state you live and work to find out what counts as income, how much it is, and if there are any deductions associated with it.
The more information you have about your total taxable wage for a year can help lower your tax liability when filing returns from multiple jobs.
5. Ensure You Have All the Necessary Records Before Filing Your Taxes
Having a record book might help keep everything organized if filing alone isn’t enough. If you’re looking for a way to speed up the process, there are tools that can help calculate your tax liability as well as file all required documents on behalf of their users. You can also generate all your pay stubs in a few minutes using paystub creator and then use it to record all deductibles, taxes, and income.