If I Worked in Two Different States, How Do I File Taxes?

Filing taxes can become complex when you’ve worked in two different states within the same tax year. With the rise of remote work and job mobility, it’s increasingly important to understand how state tax obligations intersect with your employment history. This process involves understanding residency rules, income allocation, and tax credits.

Determining Primary State of Residency

Establishing your primary state of residency is crucial when working in multiple states. Residency typically refers to where you maintain your permanent home and intend to return after temporary absences, often called your “domicile.” Factors such as the location of your home, where you spend the majority of your time, and where you are registered to vote influence this determination. For example, if you own a home in New York but temporarily work in California, New York is likely your primary residence.

State tax codes outline specific criteria for determining residency. New York, for instance, considers you a resident if you maintain a permanent place of abode and spend more than 183 days in the state during the tax year. California applies a “close connection” test, examining ties like property ownership, family location, and business activities. In cases where two states claim you as a resident, double taxation may occur unless addressed through reciprocal agreements or tax credits. Consulting a tax professional can help ensure compliance with both states’ regulations.

Part-Year vs. Nonresident Filing

Filing as either a part-year resident or a nonresident depends on your circumstances. Part-year residency applies when you establish residency in a state for only part of the year, often due to relocation. You must report all income earned while residing in that state and any income sourced from that state during your nonresidency. For example, if you moved from Illinois to Texas midway through the year, you would file as a part-year resident in Illinois.

Nonresident filing applies when you earn income in a state where you do not reside. As a nonresident, you report only the income sourced from that state. States like New York and California provide specific forms—IT-203 and 540NR, respectively—to detail income allocation. Properly distinguishing between these two filing statuses is essential to avoid overpaying taxes.

Allocating Income Among States

Allocating income among states requires understanding each state’s tax regulations and how they affect your earnings. For example, New York’s “convenience of the employer” rule can tax remote work income if your employer is based in New York, even if you work elsewhere. Meanwhile, Pennsylvania uses a day-count method, allocating income based on the number of days worked in the state compared to total working days.

The allocation process involves calculating total income and determining what portion is attributable to each state. Using state-specific worksheets and maintaining detailed records of your work locations and activities is crucial for accuracy and in case of an audit.

Applying Credits for Taxes Paid

Tax credits for taxes paid to another state can prevent double taxation when managing multi-state obligations. For example, if you reside in Connecticut but earn income in Massachusetts, Connecticut may provide a credit for taxes paid to Massachusetts.

These credits vary by state. New Jersey, for instance, allows credits only for income also taxed in New Jersey. Proper documentation, such as copies of tax returns filed with other states, is typically required to claim these credits.

Special Considerations for Remote or Freelance Work

Remote and freelance work adds complexity to state tax filings, especially when income is earned across multiple jurisdictions. For example, a freelance graphic designer based in Florida who completes a project for a New York client may owe New York taxes on that income.

Remote employees may face unique challenges due to rules like the “convenience of the employer” law or reciprocal agreements. Some states, such as Pennsylvania and New Jersey, allow residents to pay taxes only to their home state, even if they work remotely for an employer in another state. Freelancers often need to make estimated quarterly payments to states where they earn income. Detailed records of where work was performed and invoiced are key to accurate reporting.

Filing Deadlines and Extensions

Meeting filing deadlines is critical to avoid penalties and interest. State tax deadlines generally align with the federal deadline of April 15, though some states may have unique requirements, such as earlier deadlines for estimated payments. For instance, California requires quarterly estimated payments for nonresident income.

Extensions provide additional time to file but not to pay taxes owed. Most states accept a federal extension, but taxpayers must typically pay at least 90% of their estimated state tax liability by the original deadline to avoid penalties. Proper planning and adherence to deadlines ensure compliance and minimize financial risks.