Hi Claudine. Thanks for participating in our event. The honest answer here is that it depends on the states involved. Most states tax all income earned in the state, even if you don't live there. You also need to file taxes in the state you live in, regardless of where you earned your income. But don't worry, you won't be double taxed on the same income. You would file a nonresident return in the state where you worked, and pay taxes on the income earned there. Then you would file your resident state tax return, and take a credit for taxes paid to another state. This would reduce or even eliminate the taxes you owe to the state you live in.
The exception would be if you live in a state that has a reciprocal tax agreement (reciprocity) with the state where you work. Many states have these agreements, usually with neighboring states, that means they don't tax income earned in their state by people who live in the other state, so they only have to file in the state where they live. You can check if this applies to you here.
If you moved states part way through the year, then for this year you would file a part year resident return in each state. You would need to go through these returns very carefully, and allocate all your income accurately to each state. Calculate what percentage of your self employment income was earned while you were a resident in the first state, and what percentage applies to the state you live in now. Next year you would file a nonresident return in the first state and a resident return in your new state.
Tip: If you use TurboTax, always prepare your nonresident state returns first, so that the software can calculate your credit correctly on your resident return.
Finally, as you mentioned you sold a home, I wanted to make sure you're aware that you may not have to pay taxes on the proceeds if you qualify. Here is a great article to help with that.
