Full-time resident of two states?

[Leen1]

I am a resident of New York State but a student in Washington DC where I live more than half the year.  New York State would have me fill out my Washington DC return first (to pay taxes on Washington DC source income) and then fill out my New York return (based upon all income) but receive a credit based upon the Washington DC tax paid.

On the other hand, Washington DC has a statutory residency rule that seemingly applies because I live in Washington DC more than 183 days of the year.  Washington DC would have me fill out my New York return first (to pay taxes on my New York source income) and then fill out my Washington DC return (based upon all income) but receive a credit based upon the New York tax paid.

So, how do I handle these contrary instructions?

Also, what about income that is not sourced from any state, such as interest from a US-wide bank?  Seemingly both New York and Washington DC would have me attribute that income to them as part of filling out the second return (based upon all income), and never to the first-filled-out return (for income attributable to a specific state).  How does that affect the answer?

[KrisD15]

If you are a dependent, you are a resident of the state in which the person that claims you lives. 

If you are a non-dependent, and if you lived more than half the year in DC, you'll have to file as a resident of DC. 

Yes, do the non-resident return first, then the resident. 

Income other than wages are reported on the resident return, unless earned in a different state, such as a sale of property or rental income. 

[Leen1]

Thank you for the quick response!  No, I am not claimable as a dependent.

Yes, I have to file as a resident of Washington DC by their rules.  Thank you for confirming that.

But seemingly, yes, I also have to file as a resident of New York State by their rules.  Before school, I lived in New York; I've accepted a job offer after school in New York; the reason that I am in Washington DC is for school; my drivers license, voter registration, permanent address for mail (such as for tax returns!), etc. are all in New York.  All that makes me a full-time resident of New York State too, yes?  That's my conundrum.

So, help!, what justification do I give if New York audits me?

[KrisD15]

To clarify

Are you paying resident or non-resident state tuition or is it a private school?

[Leen1]

It is a private school; there are no in-state vs. out-of-state aspects for tuition, or for anything else for the school that I know of.

[TeresaM]

If you are from New York and are going to school in the District of Columbia, but still have a New York driver's license, a permanent address in New York, are registered to vote in New York, and do not intend in living in the District after you graduate, then you have not established domicile in the District. In that case, you are a New York resident who has a temporary assignment there. Students often are in this category.
 

If you were not a resident of New York, for instance, if you were an international student, then the 183-day-rule could apply. If you moved from New York, changed your driver's license to DC, changed your voter registration to DC, changed your permanent mailing address at the school to a DC address, you could declare domicile in the District and file a resident return there.
 

The District is reciprocal in taxes with all other states, so if you live in New York and work in the District, you can file a non-resident return in DC, then file a resident return in New York.
 

This TurboTax Help article has information about reciprocal states and shows the District of Columbia reciprocal with New York. Reciprocal states

This TurboTax Help article discusses residency status. state residency status

[Leen1]

I don't see where Washington DC says that the 183 statutory residency requirement does not apply because I am domiciled in New York.  (In fact, the Washington DC Form D-4A says the opposite.)  If you have a pointer for that, that would be very useful!

[DMarkM1]

In the scenario you present you indeed are a statuatory resident of Washington DC (see below) and domiciled resident of NY.  You are a dual resident.  So for your original question, which tax return to work first, it doesn't matter.  There is not going to be any credit for taxes paid to another state on either return because both returns will be resident returns.  You will be paying taxes to both states (DC/NY) on all income from all sources.   That would also mean including the bank interest on both returns.  

You will most likely not want to change your domicile due to the loss of dependent/education benefits to you and your parents on their returns.  

Since the income was likely earned while physically in DC, I suggest in the "My info" section you indicate NY is your resident state and that you earned income in another state and select "DC" from the dropdown menu.  Enter all the income and deductions in the federal interview and when you get to the DC return, you will be asked to confirm the correct residency.  You will "change residency" to "Resident."

(42) “Resident” means an individual domiciled in the District at any time during the taxable year, and every other individual who maintains a place of abode within the District for an aggregate of 183 days or more during the taxable year, whether or not the individual is domiciled in the District, excluding any elective officer of the government of the United States or any employee on the staff of an elected official in the legislative branch of the government of the United States if the employee is a bona fide resident of the state of residence of the elected officer, or any officer of the executive branch of the government whose appointment was made by the President of the United States and subject to confirmation by the Senate of the United States and whose tenure of office is at the pleasure of the President of the United States, or any Justice of the Supreme Court of the United States, unless the officer, employee, or justice is domiciled within the District at any time during the taxable year. In determining whether an individual is a resident, an individual’s absence from the District for temporary or transitory purposes shall not be regarded as changing his domicile or place of abode.

See page 7 here as well for who must file as resident in DC.  

[TomD8]

@Leen1 -

The 183-day rules applies whether or not you are domiciled in the district.  See paragraph (42) in this reference:

https://casetext.com/statute/district-of-columbia-official-code/division-viii-general-laws/title-47-...

However, note that the 183-day rule requires that the individual "maintain a place of abode" within the District for 183 days or more.  Temporary residence in a college dormitory or fraternity/sorority house is normally not considered "maintaining a place of abode" for state tax purposes.    

[Leen1]

@DMarkM1: I agree that filing a full-year resident return to both New York and Washington DC could be the right solution.  However, paying taxes on all income to both states without any credits doesn't sound right.  On my New York resident return could I take a credit for the portion of my Washington DC taxes that were for Washington DC-source income ... and vice versa? 

@TomD8: I and roommates who are also students are renting a house.  That was all of 2021 because my summer job was in Washington DC too.  Is that temporary enough to not be "maintaining a place of abode" in Washington DC?

[TomD8]

@Leen1 --

The fact that you lived in and maintained your own rented apartment in DC for an entire year would make you a resident of DC for tax purposes.  You thus have a situation of dual residency, since NY appears to be your domiciliary state (your primary, permanent residence to which you intend to return).  Thus I agree with @DMarkM1 that you are a domiciliary resident of NY and a statutory resident of DC.

Here are NY's rules regarding an "other state credit":

https://www.tax.ny.gov/pit/credits/resident_credit.htm

Page 15 of the DC tax instruction booklet states: "If you are a statutory resident, the state in which you are
domiciled gives you a credit for the taxes paid to DC." 

https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/52926_D-40_12.21.21_...

Thus you would claim an "other state credit" on your NY return, but not on your DC return.

[Leen1]

@TomD8thank you for finding "If you are a statutory resident, the state in which you are domiciled gives you a credit for the taxes paid to DC." for me.  Washington DC's wishes are pretty clear.

Is New York on board with this?  Will New York allow me a credit for the portion of the taxes paid to Washington DC that is for my New York-source income?

[TomD8]

@Leen1 --

I can't see why NY wouldn't allow you to take the credit, since DC (apparently) won't allow statutory residents to claim a credit.

[Leen1]

@TomD8 

This is what thinking about.  Is it reasonable?

• I compute my Washington DC taxes on my total income and I compute my New York taxes on my total income.  All that is left is to figure out how much other-state credit each return should have.
• For my New York return, I compute the proportionate part of my Washington DC all-income tax that is due to Washington DC income.  Because my New York average tax rate is higher, I get that as a resident credit on my New York tax return.
• For my Washington DC return, I compute the proportionate part of my New York all-income tax that is due to New York income.  That feeds into my other-state credit for Washington DC, though I don't get the full amount because my New York average tax rate is higher.

[TomD8]

@Leen1 --

I think DC is saying that, as a statutory resident of DC, you can't claim any "other state credit" on your DC return.