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I live in Tennessee but work in Alabama, do I pay taxes to Alabama?

I live in Tennessee but work in Alabama. From some short googling, I read that Alabama does not have a tax reciprocity agreement with Tennessee and therefore I would have to file in Alabama due to the state having state income tax. Is this true? I have seen a few similar questions on this site that state that I would file with Tennessee but none have mentioned the reciprocity agreement. 

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3 Replies

I live in Tennessee but work in Alabama, do I pay taxes to Alabama?

Since you work in Alabama but live in Tennessee, you will need to file a nonresident Alabama state income tax return.  

Tennessee does not have a state income tax so there would not be a Tennessee state return to file.

I live in Tennessee but work in Alabama, do I pay taxes to Alabama?

There is no need for a reciprocity agreement between TN and AL, because TN has no state income tax.   If you live in TN but work in AL, you file a non-resident AL tax return for the income earned while working in AL.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Hal_Al
Level 15

I live in Tennessee but work in Alabama, do I pay taxes to Alabama?

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.

 

Since your home state, Tennessee, does not have an income tax, you do not file a resident state return and you do not get a credit for tax paid to AL. 

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