Question

If I’m paying state taxes to one state while working in another, to which state do I pay estimated taxes?

Answer

If you are paying state taxes when living in another state, you’ll pay estimated taxes to each state based on your expected:

  • State taxable income
  • Deductions
  • Credits

Usually, the state where you live will give you a credit for the taxes you pay to the state where you work, which reduces the tax you own in the state where you live. If you have other income in the state where you live or if the state where you work has a low tax rate, you will need to estimate and pay state tax for that income. Also, if your withholding is not enough in the state where you work, you may need to estimate and pay state tax or increase your withholding.

If the states have a reciprocal agreement, you can file an exemption form. If you do, taxes won’t be withheld for the state where you work. You can ask your employer to withhold taxes for your resident state.

 

Related Topics

Related Resources

What is Form 1099-K, and Why Did I Get One? | H&R Block

Many taxpayers are stumped by Form 1099-K. Find 1099 k instructions and helpful information in this easy-to-read article from H&R Block.

Manually Monitored Installment Agreement

A manually monitored installment agreement is monitored by the IRS to ensure payments are made as required and all tax returns are filed and paid by the deadline. Learn more from H&R Block.

Form W-2G, Certain Gambling Winnings

If you receive a Form W-2G for gambling winnings, you must report the full amount of income shown on the W-2G on your tax return. Learn more from H&R Block.

IRC 6020(b)

IRC 6020(b) gives the IRS authority to prepare a return on behalf of a business, commonly called a substitute for return (SFR). Learn more from H&R Block.