How to File Taxes in Two States (Move, Remote Work)

Updated September 7, 2026. State rules differ and change; the general principles below apply in most states, and California is used as a worked example because it publishes detailed guidance. Confirm the rules of the specific states involved before filing.

The short answer: if you lived or earned income in more than one state during the year, you will usually file a resident return in the state you lived in and a nonresident return in any other state where you earned income there, and the resident state gives you a credit for tax paid to the other state so the same dollars are not taxed twice. If you moved during the year, you file a part-year resident return in each state and split your income by the date of the move. The complications come from what counts as “income earned in a state,” remote work, and a handful of states that do things differently. Here is how the pieces fit together.

Three filing statuses: resident, part-year resident, nonresident

Every state with an income tax sorts you into one of three categories for the year, and the category decides what income the state can tax.

Residency is not the same as where your mail goes. Most states look first at domicile: the one place you consider your permanent home and intend to return to. A second test catches people who spend a lot of time in a state without calling it home; many states treat you as a resident if you keep a place to live there and spend more than a set number of days in it (183 days is the common threshold, and the count and the details vary). California, as an example, presumes that someone in the state for more than nine months of the year is a resident, and decides close cases on where your “closest connections” are: home, family, driver’s license, voter registration, doctors, bank accounts, professional licenses.

What income belongs to which state: sourcing

Once your status is set, the second question is where each type of income is sourced. The general rules most states share:

• Wages are sourced to the state where you physically performed the work. Where the employer is based does not matter in most states.
• Self-employment and business income is sourced to where the business operates. A business active in two states apportions its income between them, usually by sales, and sometimes by payroll and property as well.
• Rental income is sourced to the state where the property sits, always. So is gain on the sale of real estate.
• Interest, dividends and capital gains on securities generally follow your state of residence on the day they are received or the sale happens. They are not sourced to the state where the brokerage or bank is.
• Retirement income is taxed only by your state of residence when you receive it. Federal law prohibits a state from taxing the retirement income of someone who no longer lives there, even if the pension was earned there.
• Partnership and S corporation income flows through with the entity’s sourcing: your share of a business that operates in another state is usually sourced there, whether or not you ever set foot in it.

Remote work: the rule and the exceptions

Under the general rule, a remote employee is taxed where they sit. If you live and work from home in Nevada for a company in California, your wages are Nevada-sourced (and Nevada has no wage tax), even though your employer is in California. If the same employee flies to the California office for a week each month, the wages for those days are California-sourced and reported on a California nonresident return.

A few states override this with a “convenience of the employer” rule: if your assigned office is in that state and you work remotely for your own convenience rather than because the employer requires it, the state treats your remote days as if worked at the office. New York is the best known example and applies it to employees assigned to a New York office who work from another state. New Jersey applies a mirror-image rule to residents of states that use the convenience rule against New Jersey residents. Several other states have adopted variants; if your employer is based in a state you do not live in, check whether that state applies a convenience rule before assuming your home state is the only one that can tax your wages.

The employer’s withholding does not settle any of this. Employers often withhold for the state where payroll is run, not where you worked, which leads directly to the W-2 mismatch problem below.

Moving mid-year: the part-year return

When you move, both states get a part-year resident return, and each one taxes what belongs to it:

• Income received while you lived in State A goes on State A’s return, regardless of where it was earned.
• Income received while you lived in State B goes on State B’s return, regardless of where it was earned.
• On top of that, income sourced to State A after you moved to State B (say, a final paycheck for work done in State A, or a rental you still own there) goes on State A’s return as nonresident income, and State B gives you a credit for the tax State A charged on it.

The date of the move is the date your domicile changed, which is a question of facts: the day you started living in the new home, moved your belongings, changed your license and registration. A move that is on paper only, with your family and life still in the old state, will not hold up. Keep the closing statement or lease, the moving invoice and the license change; states audit this.

Some items do not split neatly. A bonus paid after the move for work done before it is sourced to the old state. Stock options and deferred compensation are allocated over the period they were earned. A year-end distribution from a partnership that operates in the old state is sourced there. Each of these is an allocation question, and states publish worksheets for them.

The credit for taxes paid to another state

The mechanism that prevents double taxation is a credit on your resident return for tax paid to the nonresident state on the same income. The credit is generally limited to the lower of the two states’ taxes on that income, so if you live in a high-tax state and work in a low-tax one you pay the difference to your home state, and if you live in a low-tax state and work in a high-tax one the credit stops at your home state’s rate and the excess is not refunded.

The credit normally runs one way: the resident state gives it. A small group of “reverse credit” pairs flip this, and a few states have reciprocal agreements that avoid the double filing entirely, so that a resident of one state who works in the other pays tax only at home and files a withholding exemption with the employer. Pennsylvania, for example, has reciprocity with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia. California has no reciprocal agreements with any state; it allows the credit to residents for tax paid to most states, and for a few states (Arizona, Oregon and Virginia among them) the credit is claimed on the nonresident return instead.

The credit requires the other state’s return to be finished first, since it is computed from that return’s tax, and it usually requires you to attach a copy. This is why multi-state returns are prepared in a particular order: nonresident states first, resident state last.

When your W-2 shows the wrong state

The most common multi-state problem is a W-2 that does not match where you actually worked: box 16 shows all of your wages in the employer’s state, or in the state you lived in at the start of the year, or split in some way that does not reflect your days. The state on the W-2 is where the employer withheld, not a determination of where you owe tax. You still file according to where you lived and worked, and the fix depends on the direction of the error:

• Tax withheld for a state you owe nothing to (you moved away, or never worked there): file a nonresident return in that state reporting zero or the correct sourced wages and claim the withholding back as a refund.
• Nothing withheld for a state you do owe: file there and pay, and expect a possible underpayment penalty if the balance is large; ask the employer to correct withholding going forward.
• The employer will not correct the W-2: file based on your own records of where you worked (calendar, travel, badge records) and attach an explanation. States accept this; they do not accept “the W-2 said so” as the last word either way.

Income from a rental or a business in another state

Owning a rental property in a state you do not live in creates a nonresident filing there every year the property has income or loss, in most states even when the net is a loss, because the loss has to be reported to be carried forward. Your home state also taxes the rental income and gives you the credit. When the property is sold, the gain is taxed by the state where the property is, and several states require the buyer or escrow to withhold part of the sale price from a nonresident seller; California withholds 3⅓% of the sale price (or an elected gain-based amount) and the seller claims it on the nonresident return.

A business operating in another state, whether a sole proprietorship, a partnership or an S corporation, follows the same pattern: the business apportions its income to the state, you file a nonresident return there for your share, and your home state gives the credit. Partnerships and S corporations often file a composite return or pay withholding on behalf of nonresident owners, which counts as a payment on your nonresident return, not as a substitute for it. Many states now also allow the entity to elect a pass-through entity tax that the owners then credit; that election is made at the entity level and affects how you claim the credit at home.

Our rental property tax preparation and business tax preparation pages cover both situations in more depth.

California as a worked example

California publishes the most detailed guidance of any state, and its rules illustrate the general framework well.

• Residency is based on domicile, with a presumption of residency for anyone in the state more than nine months and a “closest connections” test for everyone else. A resident who leaves under an employment contract for at least 546 consecutive days can be treated as a nonresident during that period, provided visits back are limited.
• Nonresidents and part-year residents file Form 540NR. The tax is computed on total income as if you were a full-year resident, then prorated by the share of income that is California-sourced, so nonresidents pay California’s rate on California income at the bracket their total income puts them in.
• Wages are California-sourced only for days physically worked in California. A nonresident working remotely from another state for a California employer has no California wage income for the days outside the state.
• Retirement income paid to a former resident who now lives elsewhere is not taxed by California.
• The other-state credit is claimed on Schedule S by residents for tax paid to most other states and territories, and by nonresidents of Arizona, Guam, Oregon or Virginia on their California return instead.
• Community property applies to married couples domiciled in California, so a spouse’s wages earned elsewhere can be half community income for California purposes.

The states with no wage income tax

Nine states impose no tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Washington taxes certain long-term capital gains above a threshold, so a move there is not entirely tax-free. Moving to one of these states does not end filing in the state you left for the year of the move, and it does not end it for income that remains sourced to the old state afterward, such as a rental or a business there.

Documents to gather for a multi-state return

• All W-2s, with the state boxes, and any corrected W-2s.
• A day count by state for any year you worked in more than one state: a calendar, travel records, expense reports or badge records.
• For a move: the date, the lease or closing statement at both ends, and the date you changed your license, registration and voter registration.
• Rental and business records by state, and any K-1 showing state-sourced income or composite payments made for you.
• Prior-year returns for every state involved, and any state notices received.
• Records of estimated payments made to each state.

Common questions

Do I have to file in two states if I moved?

Almost always yes, one part-year resident return in each state, unless one of them has no income tax. Each state taxes the income received while you lived there.

Will I be taxed twice on the same income?

Not on the same dollars, in the normal case: your resident state credits the tax you paid to the other state. You can end up paying the higher of the two rates, which feels like double tax but is not.

I work remotely for an employer in another state. Where do I pay tax?

In most states, where you physically work, which for a remote employee is home. If the employer is in a state with a convenience-of-the-employer rule, such as New York, that state may tax your remote days as well, and your home state may or may not credit that tax. Check the employer’s state before assuming.

My employer withheld tax for the wrong state. What do I do?

File in the correct states based on where you lived and worked. Claim a refund from the state that withheld in error by filing a nonresident return there, and pay the state you owe. Ask payroll to fix the withholding for the current year.

Do I need to file a nonresident return for a rental that lost money?

In most states yes, so the loss is on record and can be used against future income or the eventual sale. Check the specific state’s filing threshold.

Multi-state returns are priced by the number of states and the type of income involved, and quoted before we start. If you moved, worked in more than one state, or own property or a business outside your home state, Get Started and tell us which states are involved; our personal tax preparation page covers what is included.

Sources

• California FTB, Publication 1031, Guidelines for Determining Resident Status — ftb.ca.gov
• California FTB, Publication 1100, Taxation of Nonresidents and Individuals Who Change Residency — ftb.ca.gov
• California FTB, Schedule S instructions, Other State Tax Credit — ftb.ca.gov
• California FTB, Real estate withholding (Form 593) — ftb.ca.gov
• New York Department of Taxation and Finance, TSB-M-06(5)I, New York tax treatment of nonresidents and part-year residents working from home (convenience of the employer) — tax.ny.gov
• New Jersey Division of Taxation, Convenience of the Employer Sourcing Rule FAQ — nj.gov
• Pennsylvania Department of Revenue, REV-581 Personal Income Tax brochure (reciprocal agreements) — pa.gov
• 4 U.S.C. § 114, Limitation on state income taxation of certain pension income — law.cornell.edu