March 17, 2025April 15, 2025Personal TaxLiezel comendadorNo Comments

Interstate migration is not uncommon. Many Americans find themselves in this situation, some working and living in two or more states. If you moved within a tax year, you might have to file taxes differently from when you were just tied to one state.

Why might preparing taxes be different for people living in different states? If you have a lot of questions running in your head now that you live and/or work in multiple states, this article will help you understand your tax implications.

Key Points | Tax Implications When Moving

Many Americans are moving to low-tax states, with South Carolina, Idaho, Delaware, North Carolina, and Tennessee recording the highest in-migration in 2024.
Moving to another state or splitting up residency (working and living in different states) in the middle of the year may require you to file part-year returns in both states.
States impose different tax laws, particularly on how many days you stay in a state to be liable to tax and what types of income to report.
Nine states currently do not impose state income tax, which means you do not need to file returns. This includes Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you work in any of these states, you only file tax returns in your home state.
Check if your current state has a reciprocity agreement with the state you are moving to or will be working in to prevent double taxation.

What If You Live and Work in Two States?

If you work in another state but continue to live in your home state, how you file income taxes depends on the following:

If the states involved have a reciprocity agreement. In this case, you file taxes only in the state where you live, not where you work.
If there is no reciprocity agreement. This means you will have to file tax returns on both states through part-year returns.

Here are other factors that affect your tax filing when you are splitting residence, that is, living and working in two different states:

If you have changed or stayed in the same job.
The types of income you earn (wage or self-employment).
Residency rules of your state (some may consider you a full resident if you live there for a minimum of 183 days).

What Is a Part-Year Tax Return?

The part-year return is the form where you report your income in different states. You file part-year returns for each of the following:

State where you live (resident)
State where you work (non-resident)

States use different tax forms for part-year filing. Be sure to check which income to report. Usually, pensions, interests, and dividends are reported in the state where you live. While you file in two states, you are only levied in one if there is a state reciprocity agreement.

Check relevant article: US Tax Brackets 2024/25.

What is a State Tax Reciprocity Agreement?

State tax reciprocity agreements make the tax withholding in paycheck simpler, as taxpayers only pay tax on their home state, not where they work. There are two types of agreements:

Bilateral – both states agree on how to handle taxes
Unilateral – only the home state decides how its residents are taxed

Both agreements ensure you avoid double taxation.

You might want to know How Long Does It Take to Get Tax Refund?

What States Have Reciprocity Agreements?

See below which states have reciprocity agreements with another:

Arizona – California, Indiana, Oregon, and Virginia
District of Columbia (Washington, DC) – Maryland and Virginia
Illinois – Iowa, Kentucky, Michigan, and Wisconsin
Indiana – Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin
Iowa – Illinois
Kentucky – Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin
Maryland – Pennsylvania, Virginia, West Virginia, and Washington, DC.
Michigan – Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin
Minnesota – Michigan and North Dakota
Montana – North Dakota
New Jersey – Pennsylvania
North Dakota – Minnesota and Montana
Ohio – Indiana, Kentucky, Michigan, Maryland, Pennsylvania, and West Virginia
Pennsylvania – Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia
Virginia – Kentucky, Maryland, Pennsylvania, Washington, DC., and West Virginia
West Virginia – Kentucky, Maryland, Ohio, Pennsylvania, and Virginia
Wisconsin – Illinois, Indiana, Kentucky, and Michigan

Depending on the kind of agreement, tax deductions may just be in your home state. Consult a tax advisor for more details.

What If There’s No Reciprocity Agreement?

If there is no existing agreement, you may have to file part-year returns to the states involved. However, it does not mean you are immediately taxed in both. The IRS makes sure that you avoid getting taxed on the same income, such as your home state getting tax credits you can claim for.

Check our guide When Are Taxes Due 2025? to ensure you file on time.

What If You Live and Work in Multiple States?

If you live in more than two states during the tax year, you file part-year returns to all the states you live in. Most likely, you will be taxed in each state. If you earn interest or dividends, income will be divided per state according to how many days you reside in a state.

Living and working in multiple states can make your tax situation very complex. To determine your exemptions or credits, be sure to consult a tax professional.

Got More Questions? We Can Help

Why might preparing taxes be different for people living in different states? It’s mainly because each state follows different tax rules, some even following flat income tax rates, meaning, everyone pays tax at the same rate. Every state is unique, which makes interstate migration taxes a real hassle. But this is where Legend Fusions can help. Talk to us today and we’ll see how to get you out of this dilemma.

Why Might Preparing Taxes Be Different for People Living in Different States?

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