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 Letter 313C – Federal Tax Deposit Penalty Proposal

Learn more about letter 313C and how to handle an IRS failure to deposit penalty with help from the tax experts at H&R Block.

IRS Letter 852C – Penalty Waiver or Abatement Disallowed

Learn more about letter 852C, why you received it, and how to handle an IRS bill for unpaid tax with help from the tax experts at H&R Block.

Tax Implications of Starting a New Business

The startup tax or new business tax is a topic many new business owners shy away from. Don't get caught off-guard. Review these tips provided by our tax pros.

IRS Letter 4838 – You Are a Client of a Payroll Service Provider

Learn more about Letter 4838, why you received it, and how to handle an IRS 4838 letter with help from the tax experts at H&R Block.