How do I File a Nonresident State Tax Return?
What is a nonresident state tax return? Do I need one?
- earned money in a state you don’t live in (you were a not a resident during the year) and the state taxes personal income, or
- another state has withheld taxes from your earnings,
you’ll need to file a nonresident state tax return for each of those other states you earned money in.
Active duty Military and their spouses are often an exception, see the last section.
Nonresident income is income from another state you didn't live in during the year, and includes any of the following:
- Wages or income from a state you're not a resident of,
- Rental income, gambling winnings, or sold a home for a profit in a state you're not a resident of,
- S Corporation business shareholder income from a business in another state,
- You are a partner in an out-of-state partnership,
- You are a beneficiary of a trust or estate that has an interest in another state, or
- Your employer withheld state tax for the wrong state. Under most circumstances, you’ll have to file a nonresident return to recover the incorrectly-withheld taxes.
Notify your employer right away so it doesn't happen again!
Your Resident-State Income.
The state where you live taxes all of your income. But the resident state should give you a credit for taxes paid to the nonresident state(s) on your resident state return, so you should not be double-taxed. The state tax credit should be a dollar-for-dollar reduction.
Note: There are exceptions to this; a few states tax income that has already be taxed by some other states. This is unusual, but it does happen.
Be sure to complete your nonresident state(s) and part-year resident states first, followed by your current resident state to ensure correct handling of the tax credits between states.
I Live in a No Income-Tax-State.
You don’t owe state income taxes only if you live and work in the 9 states that do not tax earned income – Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. See States Without an Income Tax. Look for the tip about choosing the sales tax instead of the income tax deduction when you itemize.
First, make sure TurboTax knows each state you lived in during the tax year.
In the Personal Info area of TurboTax, use the interviews to tell us that you worked in another state during the year. Look for the Other State Income section and edit it.
Answer Yes to Did You Make Money In Any Other States? to show a drop-down menu. Choose the applicable state, and repeat for each state you earned income in or that withheld state income taxes. Then click Continue.
TurboTax Online allows you to purchase and e-file up to five states. You can purchase and mail as many states as you need in TurboTax CD/Download edition, but can only e-file up to 3 of the states (the rest have to be mailed in). For more information about purchasing state tax programs, see Multiple State Tax Returns.
Make sure you prepare all nonresident returns before your resident state return, to ensure proper calculations. Also, make sure you select the state long form(s) even if TurboTax selects the short form(s) for you.
If you live and work in a Reciprocal State, you may only need to complete Step 3.
- Prepare your federal tax return first, then as you begin each state return;
- Your federal return data transfers into your state return, and
- TurboTax learns that you need to file each state return.
- Prepare a return for the nonresident state(s). Only report the income and withholdings from that state.
- Prepare a return for your resident state. You will report all of your income, including income from any nonresident (or part-year) states.
- Take a credit for taxes paid to the nonresident state on your resident state return so that you won't get double-taxed on the same income.
TurboTax calculates the credit for you, but you must select the state's long form to get the option, even if TurboTax chooses the short form for you.
Example: if you live in Kansas but work in neighboring Missouri, you would file a nonresident Missouri return in addition to your usual (resident) Kansas return. You'd then take a credit for any taxes you paid to Missouri on your Kansas return.
Reciprocal agreements allows residents of one state to request exemption from withholding for wages earned in a reciprocal state. This simplifies tax preparation because the employee often needs to file only one state tax return instead of two.
For more information and a list of reciprocal states, see What is a Reciprocal State and How Does That Work?
Lets say you work for an Ohio firm as a remote employee living in Maine. You would need to pay Maine taxes on the income. What matters is where you earned your income, not where your employer is located. Any income earned while working in Maine is subject to Maine (not Ohio) income taxes. You only have to file a Maine tax return. See Why Does Income From a Non-Income Tax State Get Taxed?
However, if the employer mistakenly withheld Ohio taxes, then you will also need to file a nonresident Ohio return to recover the erroneous withholdings. Declare that no wages were earned on the Ohio return for a full refund. Be sure to correct the state withholding to avoid a repeat next year.
The military designates a service member's home of record as the state where they enlisted, unless it was changed with a State of Legal Residence (SLR) form. Military personnel are considered residents of their military home of record. Federal law prohibits other states from taxing military wages of non-resident military members stationed in their state. For other non-military income, see Civilian Pay Earned by Active Duty Military and Military Spouse Residency Relief Act and State Taxes.
- How many state returns can I prepare in the TurboTax CD/Download software?
- Why Does Income From a Non-Income Tax State Get Taxed On My State Return?
- Download TurboTax State (Windows)