First, here are some common situations where you don't have to file a second state return:
- Interest from an out-of-state bank or account. No need to file a return in that state; just report it on your federal return as you would for in-state interest.
- Out-of-state employer. Don't file a return in your employer's state unless their payroll department accidentally withheld taxes for their state instead of your resident or work state. More info
- Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming. These 7 states don't collect personal income tax. However, if you earned money in one of these states but live in a state that does collect income tax, you are required to report the income on your resident state return. More info
- State reciprocal agreements. You won't have to file 2 state returns if your resident and work states have a reciprocal agreement and you submitted the proper exemption form to payroll. This article has info about both.
Now that those are out of the way, read on for situations where you probably have to file multiple state returns.
In this context, we're talking about leaving one state for another, changing your home state, setting down roots somewhere else, that sort of thing.
We don't mean temporary moves for short-term work or school if you intend to return to your home state; that's covered in the next section.
Anyhow, if earned money in each state, you'll need to file a part-year return for each state (assuming each state has an income tax). We'll walk you through this process.
See this article for handling common part-year scenarios.
Income gets reported to the state it's earned in. Generally, this means out-of-state workers have to file a return for their work state in addition to their resident state (reciprocal agreements and non-income tax states notwithstanding). Examples include:
- Out-of-state students who earn income in the state where they attend school
- Workers who regularly commute across state lines, e.g. New Jersey residents who work in New York (the same principle applies to other states)
- Employees who perform work in other states on assignment
Typically, the taxpayer would file a nonresident state return for the state they worked in and pay that state's tax. They would then take a credit for taxes paid on their resident state return. TurboTax easily handles nonresident state returns.
If your out-of-state business or rental property generates income, you'll need to file a nonresident return in that state.
But even if it doesn't, the state may require you to file a return anyway, or you might file to take advantage of state-specific credits, such as property tax credits. Check with the state Department of Revenue for state-specific rules and regulations.