“By all means, make that huge cross-country move. Just don’t forget about it come tax time.Chris Ryan/caiaimage/Getty Images
Not very many people can relax when moving to a different state. Between hunting for real estate, packing, transporting and unpacking, a big move can be one of the most stressful times in a person’s life. But by the time tax season rolls around, there’s no reason to let the panic return. If you moved to a different state in the middle of the tax year, you’re not going to get penalized or overloaded with paperwork. In fact, here’s some good news: Your federal tax return won’t even be affected.
See? No panic necessary. And although it might seem intimidating to learn that you’ll be required to file returns in two different states, there’s no reason to find the process daunting. You just need to know the rules of each state, and we’ll walk you through what you should be looking for.
First, make sure that each state you lived in collects a state income tax. Several states don’t, and that means any income earned in these states doesn’t have to be reported on a state return. If you’re not lucky enough to live in one of those states, your next step is to get the right form to declare your income. (And start with the "old" state you made money in, not the one you moved to.)
If you’re using a tax preparation software program, it will pull up the correct form for you. But if you’re going it alone, then you’ll need to determine what the particular state requires. Some states offer a "part-year" return (meaning you only claimed residence for part of the year), while others have you fill out a regular or nonresident return after a move. The good news? That’s pretty much the gist of it. Fill out the forms, send them off and just remember that next year you’ll (most likely) only be filing in the current state you live in.
But while that answers how your tax preparation is affected, it might not tell you what exactly is happening with your actual taxable income. And in some ways, it’s difficult to say, since each state had different income taxes.
However, we can speak broadly and say that most states will prorate your taxes based on the amount you actually made in the state where you’re filing. Basically, it will take your entire income (from both states), and then tax you on the percentage you made in each state. So let’s say you made $100,000; $20,000 of that income was in one state, $80,000 in the second. Both states might tax you on the full $100,000, but the first state will only ask you to pay 20 percent of the taxes that are due on it, and the other will ask you to pay 80 percent of the taxes due. Other states might ask you to prorate your itemized deductions, exemptions and credits so that you’re only paying taxes based on a prorated portion of those.
Originally Published: Dec 18, 2014
State Tax Return FAQ
How do I file taxes if I moved to another state?
First, get the right form to file your taxes in each state. For some states, you have to file a “part-year” return, which means you only claim residence for part of the year. For others, you have to fill out a regular or nonresident return once you have moved to the new state. Filing online using software can simplify the process, as it will ask you where you lived during the year and prompt you accordingly.
Do I have to file taxes in two states if I moved?
If you move from one state to another during the year, you will have to file state income taxes in both states. Depending on the state law, you will either have to file “partial-year resident” returns or a “nonresident” return after a move.
Do you get double taxed if you work in a different state?
In 2015, Congress passed a law that ended double taxation. If you moved states during the year, you will have to pay income tax to both, but you can’t be taxed twice on the same money. Each state will prorate your taxes based on the amount that you earned in the state where you’re filing.
Is income tax the same in every state?
The federal government and most states have income taxes, but their rules and rates vary a great deal. Several states don’t even collect a state income tax, which means any money you make in these states doesn’t have to be reported on a state return.
How long do you have to live in a state to file taxes there?
In most states, you are considered a resident after you’ve lived there for six months. However, you have to be gone from your old state for 18 months to be considered a nonresident.
Lots More Information
- 10 Tax Tips for the Recently Divorced
- 10 Tax Tips for Students
- How are your taxes affected if you get married in the middle of the year?
- Are moving expenses deductible?
- How to File Taxes for the First Time
- TurboTax. "How do I file a part-year resident state tax return?" Intuit. (Oct. 23, 2014) https://ttlc.intuit.com/questions/1901227-how-do-i-file-a-part-year-resident-state-tax-return
- TurboTax. "I moved to another state during the year." Intuit. 2013. (Oct. 23, 2014) https://ttlc.intuit.com/questions/1901560-i-moved-to-another-state-during-the-year