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I live in NC and my only income is earned in SC. how can I calculete what I will owe to NC?

Should I have NC state tax withheld?
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2 Replies
Hal_Al
Level 15

I live in NC and my only income is earned in SC. how can I calculete what I will owe to NC?

 The general rule is: your report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state. You will have to file a non resident SC state return and pay SC tax on the income earned there.. You will also file a NC full year resident return and calculate tax on ALL your income. NC will give you a credit, or partial credit, for the tax you pay SC. So, there will be little or no double taxation, but you have the cost and hassle of filing two state returns. Do the nonresident state return first.

 

Q.  How can I calculate what I will owe to NC?

A.  Don't bother. The credit, for SC tax paid,  will most likely cover all the NC tax. 

 

Q. Should I have NC state tax withheld?

A. No. Because of the credit, you will owe no NC tax on the SC wages. 

 

 

I live in NC and my only income is earned in SC. how can I calculete what I will owe to NC?

NC has a flat tax of 4.75% (after the first $12,500 of income) while SC has a graduated tax structure that begins at 3% and goes to 6.0%.

 

The standard deduciton is similar in the two states but not the same (NC is $12,500 for filing Single while SC is exactly whatever the  federal standard deduction is)

 

At the low end of the income scale, NC is going to have a higher tax rate, so you'd owe in both states, but at the higher end, SC has the higher tax rate, so nothing would be owed to NC.

 

Figure for someone filing Single, the cutover point is around $40,000, meaning if you make less than around that amount be prepared to pay most of the tax to SC and a small amount to NC.  Over around $40,000 there won't be anything due to NC.

 

My suggestion: don't worry about NC withholdings, but put a small amount in savings just in case (or FIle very early, get your federal refund by late Feb and then you'll have $$ to pay NC on April 15 of that becomes necsssary. )

 

As noted, you'll complete the SC tax return first, and then complete the NC return.  The NC tax will be based on  4.75% times the part of your income tax exceeds $125000 LESS whatever the tax liability to SC is (but can;t be less than zero, i.e. NC is not going to give you a refundable credit). 

 

here is a approx way to estimate the NC tax you might owe. 

 

1)Take your annual income less $12,500 and multiply the result by 4.75%

2) Then estimate the withholdings on your SC paycheck for the year. 

If 1) is higher than 2) be prepared to pay the difference to NC 

if 2) is higher than 1), you shouldn't owe anything to NC

 

that should be 'close enough'

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