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

IRS Notice

Received a notice/letter from the IRS? Read the IRS definition and get more insight about IRS notices from the experts at H&R Block.

Time to Get Right with the IRS or Lose Your Passport

Seriously delinquent tax debt can cause your passport to be restricted. Find out if you could be impacted and learn how to fix the problem.

Medical Identity Theft – A New Source for Fraudsters

H&R Block wants you to be aware of fraudulent activity pertaining to health. Find out what medical fraud is and how to prevent it from happening to you.

Amending Tax Return with Form 1040x

Can you amend your tax return to add dependents if you already filled your return? Get tax answers from H&R Block.