What If I Have Two W2 Forms From Different States?

Receiving two or more W-2 forms from different states is a common scenario for many taxpayers. This can happen if you moved, worked for a company in one state while living in another, or had multiple jobs in different locations. This situation introduces a layer of complexity to your annual tax filing obligations, and navigating the requirements of multiple state tax agencies is necessary to ensure you pay the correct amount of tax and avoid penalties.

Determining Your State Filing Requirements

Your filing requirements are dictated by your residency status in each state where you earned income. States classify individuals into one of three categories: full-year resident, part-year resident, or nonresident. A full-year resident lived in one state for the entire tax year, and that state taxes all of your income, regardless of where it was earned. You become a part-year resident in two states if you move from one to another during the tax year; in this case, each state will tax the income you earned while you were living there.

A nonresident status applies if you live in one state but work in another. For example, if you commute from your home in State A to a job in State B, you are a resident of State A and a nonresident of State B. The nonresident state (State B) will only tax the income you earned from working within its borders. Your resident state (State A) will tax all your income, including what you earned in State B, but has a mechanism to prevent double taxation.

Some states have what are known as reciprocity agreements, which can simplify the tax filing process for nonresidents. These are agreements between neighboring states that allow a nonresident to request an exemption from tax withholding in their work state. If such an agreement exists and you provide your employer with the correct exemption form, you would only need to file a tax return in your home state.

Information Needed from Your W-2s

Carefully examine both documents, as they contain the figures you will need to accurately report your income and taxes paid to each state. The information for state tax purposes is located in Boxes 15, 16, and 17 of the Form W-2.

Box 15 shows your employer’s state ID number. Box 16 reports the total amount of your wages, tips, and other compensation that is subject to that specific state’s income tax. This figure may be different from the federal wages reported in Box 1. Finally, Box 17 details the total amount of state income tax that was withheld from your paychecks for that particular state throughout the year.

You will need to report these figures directly onto the corresponding state tax forms. If you have two W-2s from different states, you will have two sets of numbers for Boxes 16 and 17. It is important to keep the information for each state separate and not combine them.

The State Tax Filing Process

The order in which you prepare and file your state tax returns is important in multi-state tax situations. You must always complete any nonresident or part-year resident returns first, before you file your full-year resident state return. This sequence is necessary because the results from the nonresident return directly impact the calculations on your resident state return.

When filling out a nonresident return, you will only report the income earned in that specific state, as shown in Box 16 of that state’s W-2. You will calculate the tax owed to the nonresident state based solely on that income. For a part-year resident return, you will similarly report the income earned during the period you lived in that state.

After you have determined the tax owed to the nonresident state, you can then complete your resident state tax return. On this return, you will report all of your income for the year, including the wages earned in the other state. To prevent double taxation, your resident state allows you to take a “credit for taxes paid to another state.” This credit is the lesser of the actual tax you paid to the nonresident state or the amount of tax your resident state would have charged on that same income, and it directly reduces the tax you owe to your home state.

Impact on Your Federal Tax Return

Having W-2s from multiple states has a minimal impact on the preparation of your federal tax return, specifically Form 1040. For federal purposes, all of your income is treated the same, regardless of where it was earned. You will simply add the amounts from Box 1 (Wages, tips, other compensation) of all your W-2 forms together to determine your total federal gross income.

The primary area where multiple state filings affect your federal return is on Schedule A, Itemized Deductions. If you choose to itemize instead of taking the standard deduction, you can deduct state and local taxes you paid during the year. This is known as the SALT deduction. You combine the state income tax withheld from Box 17 of all your W-2s to calculate your total state tax deduction.

The Tax Cuts and Jobs Act of 2017 introduced a cap on the SALT deduction. Taxpayers are limited to a maximum deduction of $10,000 per household, per year, for all state and local taxes combined, which includes property taxes and either income or sales taxes. This cap applies regardless of how many states you paid taxes to.