Starting fall 2017, I will live in AZ, but my job will be based in TX (UT Austin). I'm telecommuting. TX has no state income tax. Will I owe 2017 AZ state income tax?

[leache]

My wife and I own a home in Phoenix.

[DanielV01 · Accepted solution]

Yes.  You will always owe tax on income earned to your resident state.  In this case, your income is being earned in Arizona (although there are some states that treat telecommuting as earning money in their state, so the question is a legitimate one), but even if the income were taxed elsewhere, Arizona would still tax the income (and give a credit for tax paid on the income to your nonresident state).  You will want to advise the TX company to withhold AZ tax for this purpose.

[leache]

Will I be able to in some manner indicate that only a portion of the income was earned as an AZ resident so I'm not taxed by AZ on the portion of the income earned prior to moving to AZ?

[DanielV01]

Yes.  You will file an AZ part-year return, and then use the allocation screen to provide the amount earned in AZ.  If you do not know the exact amount, you can divide the number of work days you had in AZ by the number of work days you had overall with that company (if you don't work the full year for them), or the number of days you live in AZ by the number of days in the year overall (if you did work the full year with them), and multiply the percentage by the Box 1 income.  That will determine the AZ amount.