Dual State Residency

[rvenia]

I started working in California but still have a residence in Colorado will maintain a Colorado residence and residency. I understand Colorado has benefits so that I am not hurt too much filing in both states. How do I file?

[ToddL · Accepted solution]

You are generally a resident of only one state.

When you complete the Personal Interview:

1. Select Colorado as your state of residence on December 31, 2016;
2. Answer "No" when asked if you "Lived in another state in 2016?" That question only applies if you changed your state of residence in 2016.
3. Answer "Yes" when asked if you "Earned money in another state?", that state would be California.

The program will prompt you to prepare a resident Colorado tax return and a non-resident California return. Prepare the California return first.

You will pay CA tax on your CA income. CO will also want to tax that income, but will give you a credit (against CO tax), for the amount paid to CA on the same income.

[cmcb2019]

Your answer specifically referenced 2016.

Is this still the case in 2019?

I am a resident of CO but am moving to NC for part of the year, but will be moving back to CO for remainder of year.

I wish to maintain my CO residency.

[hbl3973]

Basically, yes that still applies.  NC charges a flat tax rate on NC-derived income.  NC's is 5.25%.  CO has switched from a flat 4.63% tax rate to one that gradually increases starting at income level $150,000 up to 6%.  You would prepare the NC return first and then claim a credit on your CO return against the NC tax.  You would probably not get a full dollar-for-dollar tax credit as the credit is capped against what you would owe CO on that same income.

[TomD8]

@cmcb2019 There is another wrinkle with regard to NC.   NC will regard you as a resident (and tax ALL your income) if you are "present within NC for more than 183 days during the tax year."   https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements

[kas123]

This idea that you can only be a resident of one state is not a federal law (if it were, simply provide a citation), but rather a myth perpetuated by TurboTax because the software doesn't support dual state residence.

You can absolutely be a resident of two state: for example, you could be domiciled in State A, but have spent 183+ days and have a house in State B. Both states would consider you a resident.

There are many court cases to this effect: example: https://www.aprio.com/new-[product key removed]ds-double-taxation-of-dual-resident-on-investment-inc...

Here's a good article by a large tax firm: https://www.bakertilly.com/insights/[product key removed]ency-can-result-in-dual-taxation

[TomD8]

"...but rather a myth perpetuated by TurboTax because the software doesn't support dual state residence."

First, you're commenting on an almost 5-year-old thread.  Second, no one at TurboTax has ever denied that dual residence is possible.  A taxpayer can certainly be both a domiciliary resident of one state and at the same time a statutory resident of another.  The TT software isn't set up well to handle dual residency, but TT isn't "perpetuating" any "myth" about it.