How to File Taxes if You Worked in 2 Different States

Working in two states can require more than one state income-tax return. The usual pattern is a resident return for the state where you live and a nonresident return for the other state where you earned income. If you moved during the year, one or both returns may be part-year resident returns.

Most resident states tax all income, then allow a credit for qualifying income tax paid to another state so the same income is not fully taxed twice. Reciprocity agreements and remote-work sourcing rules can change that result.

Step 1: Determine Your Residency Timeline

List every home, move date, and domicile fact during the tax year. Domicile is the permanent legal home you intend to return to, while statutory residency can arise from maintaining a home and spending enough days in a state.

• Full-year resident: lived and remained domiciled in one state all year
• Part-year resident: permanently moved into or out of a state
• Nonresident: earned state-source income without becoming a resident
• Statutory resident: met a state’s home and day-count tests despite another domicile

A temporary work assignment does not always change domicile.

Step 2: Identify Where Each Income Item Is Taxed

Income	Common Sourcing Approach
Employee wages	State where services were physically performed, subject to reciprocity or special rules
Remote-work wages	Physical work location, except states with convenience or employer-location rules
Business income	Allocated or apportioned under state rules
Rental income	State where the real property is located
Sale of real estate	State where the property is located
Interest and dividends	Usually resident state, with exceptions

Do not allocate wages solely from the employer’s headquarters. Use workdays and the state’s sourcing rules.

Step 3: Review Forms W-2 and Withholding

Boxes 15 through 17 show state wages and withholding. One employer may issue multiple state lines or separate W-2 pages. Confirm:

• Each state abbreviation is correct.
• Withholding belongs to the correct year.
• State wages do not exceed or omit the amount required by that state’s method.
• Local tax entries are identified separately.
• A corrected W-2 is obtained when payroll reporting is wrong.

Withholding does not determine where tax is legally owed. It is a prepayment that must be reconciled on the return.

Step 4: Check for Reciprocity

Some neighboring states agree that employee wages are taxed only by the worker’s resident state. The employee usually gives the employer a state exemption certificate to stop nonresident withholding.

Reciprocity often covers wages but not business income, rental income, or other sources. If tax was withheld incorrectly, file the nonresident state return to request a refund and pay the resident state as required.

Step 5: File the Nonresident or Part-Year Return

1. Prepare the federal return first.
2. Complete the work state’s nonresident or part-year form.
3. Allocate income using workdays, payroll records, or the required schedule.
4. Claim withholding and estimated payments.
5. Save the tax calculated on the income taxed by that state.

Preparing the nonresident return first often helps because the resident return’s credit may depend on the actual tax paid to the other state.

Step 6: File the Resident Return

Report all income required by the resident state, including income earned elsewhere. Then complete the credit for tax paid to another state. The credit is usually limited to the lower of:

• The tax actually paid to the other state on the overlapping income, or
• The resident state tax attributable to that same income.

A refund from the nonresident state can reduce the allowable credit.

Step 7: Allocate Deductions and Credits

Part-year and nonresident forms may prorate deductions, exemptions, and credits or calculate tax using a ratio. Follow each state’s schedule. Do not divide everything in half merely because you worked in each state for six months.

Remote Work and Convenience Rules

Most states look to where the employee physically worked. A smaller group can source remote workdays to the employer’s state when the employee works elsewhere for personal convenience rather than employer necessity. The exact test and court decisions change, so check both state tax agencies for the tax year.

Keep calendars, travel records, office assignments, and employer remote-work policies.

Example

A resident of State A works 60 days at an office in State B and the remaining days in State A. State B taxes the wages allocated to the 60 workdays. State A taxes the full annual income but may allow a credit for the State B tax on those wages. If the states have wage reciprocity, State B may not tax the wages at all.

Common Mistakes

• Filing two full-year resident returns without legal basis
• Reporting all wages to the employer’s state
• Assuming withholding proves taxability
• Failing to claim the resident-state credit
• Claiming credit for taxes later refunded
• Ignoring local city or county income tax
• Using calendar days instead of workdays when the schedule requires workdays
• Overlooking a convenience-of-the-employer rule

Writer’s Opinion

The most valuable record is a contemporaneous work-location calendar. It is stronger than reconstructing a year from memory after receiving a notice.

Tax software can handle ordinary resident and nonresident returns, but remote work, a midyear domicile change, stock compensation, business income, or statutory residency can justify professional multistate advice.

Frequently Asked Questions

Will I pay tax twice?

You may calculate tax in both states, but the resident-state credit commonly prevents full double taxation. Rate differences can still leave additional tax.

What if the employer withheld for the wrong state?

Request payroll correction when possible and file the affected state return to reconcile or claim a refund.

Which return should I prepare first?

Usually prepare the nonresident work-state return before the resident return so the credit can be calculated accurately.

Does moving automatically make me a part-year resident?

A genuine permanent move usually does, but temporary absence and domicile facts matter.

Executive Summary

Establish residency dates, source each income item, review state withholding, check reciprocity and remote-work rules, file nonresident or part-year returns, then claim the permitted resident-state credit for overlapping income.