I'm trying to find out more information about the difference between wages and income for state tax purposes

[TuckerdogAVL]

Most information online, when you google or search "wages vs income," for example, you get ways to pay wages, wage payrolls, w2s. Not my question. I'm looking at retiring in different states. I've checked some sites ie SmartAssets and it estimates "wages" only. I would have self-employment income and I would have income from sales of assets. So, do I plunk that info into "wages" The income I assume is taxed at the same rate. (Not pension, social security or retirement annuity).

[Opus 17]

You really have to ask the website that is making that distinction. The best I can tell you is that for certain purposes, the IRS defines “compensation“ as income earned from providing a service.  Compensation includes both wages and self-employment income, in other words, income that is subject to Social Security and Medicare or self-employment tax.  Pensions, short and long-term capital gains, lottery prizes, and other types of income are not “compensation.“  For example, you can only contribute to an IRA if you have compensation from working. And if you retire before your full retirement age, the Social Security administration will reduce your benefit if you have more than a small amount of compensation from working.

[GeorgeDenseff]

This is like trying to figure out the difference between apples and fruit.  Apples are a type of fruit.  Wages are a type of income

[Mike9241]

the first question that arises is your state of domicile. it can be defined as the state where you maintain your permanent residence.  it becomes complicated because you can be domiciled in state X and perform services for an employer in state Y. in some cases you only file and pay taxes in state X-states X and Y have reciprocal agreements so you only pay taxes in your state of domicile or there may be something in state Y laws that exempts some of or all of the wages you earned there. in other cases, you would need to file income tax returns in both states. however, state X gives you partial or full credit for the taxes paid to Y.   

wages is what a business (employer) would pay you for services performed for it. the employer pays 1/2 of the social security and medicare taxes and the other 1/2 is taken out of your paycheck. 

self-employment is where you are your own employer/boss.  however, you pay both parts of the social security and medicare taxes. the IRS and states generally allow a page 1 deduction for 1/2 of these taxes. there are other advantages and even disadvantages to being self-employed.  it's more complicated because as your own employer you can form a corporation. then the corp pays you a salary and for a C-Corp - it pays federal and probably state taxes on any remaining income. An S-Corp also would need to pay you a salary and you also get taxed on the remaining income. Further, some states impose an income tax on the S-Corps remaining income. (Illinois is one of them)  

self-employment income is different. there are no interstate reciprocal agreements so if you earned self-employment income in multiple states you are supposed to file an income tax return in each state in which you exceed its filing threshold. generally, to be liable for income taxes on self-employment income in the non-domiciled state you need to be present and perform the services or sell a product in that state and earn more than the filing threshold.  But again state laws vary greatly.  too complicate state issues further some states and even some cities within a state charge a "sales tax" on certain types of self-employment income in addition to their income tax.  

if your only focus is state income taxes why not move to a state that doesn't have them. The states that do not charge a state income tax are Alaska, Nevada, South Dakota, Washington, Texas, Wyoming, and Florida. warning living in those states could have hidden costs which could make it better to live in a state with an income tax. 

[TuckerdogAVL]

Thanks, but I know and understand all that. The difficulty is that on sites such as Smart Assets, again, it specifies Wages vs. Income. According to Smart Assets, NY is an unfriendly tax state, but, when I plug in the same numbers for VA or PA, which are said to be friendly, the state tax is twice is high as NY. 

State taxes isn't the only thing I'm focused on. Don't know where you got that idea from my question. Climate, Cost of Living, Amenities, Water, Friends, Environment, property taxes, healthcare ... As for the tax-free states, I lived in FL. It's a horrible place now, especially politically. I have no desire to be surrounded by mask debaters and antivaxxers (and I have many friends left there). There are no seasons and horrible climate and water. I don't particularly like 90 degrees and 100% humidity 8 months out of the year. I couldn't wait to get out of there. 

I have no desire to be in Wyoming South Dakota, Alaska where the reverse is true, weatherize but not politically. Nevada is running out of water. Texas. Please. They can't even handle their electric grid now, let alone if people actually start buying and using electric cars. I don't even like changing planes there. 🙂 

So, I'll continue to see if I can get an answer to my original question. Your advice, I'm sure, will help some people who have never had a job, never worked, never had self employment income, has never invested in anything or works for tips. The best thing I can probably do is see if I can find someone in a particular state that can answer a question... but of course for a fee. Because that's what we do in America. Thanks for your time. 

[TuckerdogAVL]

the problem comes in when websites refer to their calculators to get an idea of the state tax bite and they refer only to wages and incomes like pension, annuities and social security. Some states tax all, some partial, some none. The vague part is where you put in "income" that isn't in those categories, and isn't actually wages or compensation, but "income" that is subject to state taxes (like withdrawals from investment situations). Since income other than wages is identical, except that w/h (FICA) and ss haven't been paid on them, the best guess is to enter that information under wages, I assume, since any of that money is considered income and thus taxable. There's no other place to do so. Of course, cap gains also come into play if one is in that position as well. 

[Opus 17]

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@TuckerdogAVL wrote:

So, I'll continue to see if I can get an answer to my original question. Your advice, I'm sure, will help some people who have never had a job, never worked, never had self employment income, has never invested in anything or works for tips. The best thing I can probably do is see if I can find someone in a particular state that can answer a question... but of course for a fee. Because that's what we do in America. Thanks for your time. 

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You need to go back and read my original answer.  We don't know what you need to know because we don't know how any particular web site makes calculations or what the tax laws are of the states you are considering. 

As far as federal law is concerned, "compensation" for work performed, also called earned income, includes both wages and self-employment income.  The only important difference federally is that for wages, your employer pays half your social security and medicare tax and you pay the other half; and for self-employment, you pay both halves because you are both the employer and the employee.

I don't know of any state that taxes wage compensation differently than self-employment compensation, but I don't know the laws of all 50 states.  Therefore, I would assume that if a retirement planner talks about "wages", they are really including all forms of "compensation" including self-employment.  But you would have to check with the web site to see if that is really what they are basing their calculations on.