How to File State Tax (Residency)

[joefam1963]

I work for the Fed Gov't (in Maryland). I lived in VA through March 2021, but moved to SC, where we rent an apartment in March 2021 (changing mail) - but didn't change my driver's license to SC until late November 2021. Because of Covid, I could telework anywhere, and when my brother had medical issues in VA, to serve as his medical advocate, I began teleworking from my brother-in-laws house in Fairfax, VA from August 2021 through the end of 2021. I'm trying to determine if I can file as partial VA resident through November 2021 and partial SC resident from November through December 2021 or file as full time VA resident since I've been in VA through Dec 2021 (and still currently)?? And do I need to file a MD non-resident for the time after I officially changed by Driver's License to SC? I file married/joint, but my spouse doesn't have earned income.  Basically, which state(s) to file and what forms are appropriate?

[ErnieS0]

It depends. File a full-year Virginia return. We'd need more information to tell you how to file South Carolina.

Virginia

You are a full-resident of Virginia even though you moved to South Carolina because you spent more than 183 days in VA.

Virginia defines you as an "actual resident".

Individuals who are physically present in Virginia, or who maintain a place of abode here for more than 183 days during the taxable year are actual residents. The period of residency does not have to be consecutive days. 

It is possible to be an actual resident of Virginia and a domiciliary resident of another state.

Residency Status

South Carolina

Is your wife still in South Carolina? If you got a South Carolina driver's license, I assume you still maintain your residence there.

The IRS has a concept called a tax home, meaning your "home" for tax purposes is where you earn your money. Because your wife does not work and you went back to Virginia, you can file as a part-year South Carolina resident from March to August.

Virginia will double tax the same income so you can claim a credit on one of the state returns for tax paid to the other state.

South Carolina's tax rate is higher, so it's probably better to claim a credit on the SC return. However, if your employer has been withholding SC tax since March, claiming the credit on VA will reduce the amount you have to pay to VA.

If you plan to move back to VA, you can instead file a nonresident SC return and claim the other state tax credit on the VA return.

Maryland

Virginia and Maryland have reciprocity, meaning a resident of Virginia will not have to file a Maryland tax return if the only income comes from a W-2. The federal government should have withheld VA tax during the time you worked in Maryland. 

[joefam1963]

Hi Ernie,

Thanks for the information. Based on some of your questions, you mentioned a few options.  Would the simplest option just to file as if I just moved to SC on March 1, 2021 permanently (without worrying about coming back to VA for any part of the year?)  Meaning, I file VA as a part-time resident from Jan 1 - Mar 1, 2021, and file SC from Mar 1 - Dec 31, 2021?  OR would it be easier (if allowed) to file as full-time VA resident for 2021 based on "tax home" you mentioned (but how do I PROVE that I spent the time at my brother-in-laws as I didn't get any mail there - is my word enough?) and not worry about filing in SC, since I'd be claiming VA as my full-time residency (>183 days)?  But, even if I do the last option, do I still have to file in SC too since I did work there for the other part of the year (claiming the credit that you mentioned)?  I understand that if I file as a full-time VA resident, I don't have to file in MD (reciprocity), but if some of my time was in SC (do I have to pay SC some tax too, and if so, do I then need to file a non-resident return to MD for the pay I received while working in SC??  When the situation with my brother is complete, I do intend to go back to SC full time.

Sorry for the complicated question and follow up, I just want to do what's right/correct.

[ErnieS0]

The simplest option would be to match what's being reported on your W-2. If your W-2 shows South Carolina withholding from March to December, then filing part-year Virginia and part-year South Carolina would sync up your state wages, state tax and state withholding.