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How to File a Nonresident State Tax Return

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A nonresident state tax return is a return to a state that you are not a resident of.  If you have worked in another state or made other types of income in another state you may need to file a nonresident tax return.

Also see: Do I Need to File a Nonresident State Tax Return?

How to Get Started

First, you’ll need to figure out how much income you made in the nonresident state and how much income you made in your home state.  Most nonresident returns will also use figures from your federal return, so make sure to complete your federal return first.

Allocating Deductions and Income

In most states, you will list your total income from your federal return in one column and your income as a nonresident in another column.  From the totals of those two columns you will calculate the percentage of your nonresident income to total income.  We'll call this your "nonresident percentage."  Depending on what state you're in, you will use this percentage to allocate either your taxable income, your deductions, or your tax liability.

Allocating Taxable Income:

Some states will have you calculate your taxable income in that state as if you were a resident.  You would then multiply this by your "nonresident percentage" to come up with your taxable income as a nonresident.  Virginia is an example of a state that uses this method. 

Allocating Deductions:

Other states will have you multiply this "nonresident percentage" by your federal deductions.  This amount will be your nonresident deduction amount which you will subtract from the income you made in that state as a nonresident.  Maryland uses this method.

Keep in mind that certain federal deductions, such as the deduction for state and local taxes, are not deductible for state tax purposes.  You will have to adjust for those differences on your return.  You will also be able to add any state-specific tax deductions as well.

Allocating Tax Liability:

Some states, such as Delaware, will allow you to offset your nonresident income by your federal itemized deductions (after adjusting for non-deductible items such as state and local taxes).  These returns then have you multiply your actual tax liabilty by your "nonresident percentage" to come up with your tax liability as a nonresident. 

If You Moved During the Year

If you moved to another state during the year, you will mostly likely need to file a part-year return instead of a nonresident return.  See how to file a part-year state tax return.   

Filing the Return in Your Resident State

You’ll also need to file a return in your resident state.  On this return you’ll include all of your income, even the income you made in the nonresident state.  This is because most states tax the income of residents reguardless of its source.

Credit for Taxes Paid to Another State

Most states offer residents a tax credit for taxes paid to another state or jurisdiction.  Be sure to take this credit on the return you file in your home state. 

Most states do not allow nonresidents to take this credit.

Filing a Return for Mistaken Withholdings

If you are filing a nonresident return because taxes were withheld for the state by mistake and you did not make any income in the state, you would simply report zero income for that state on your nonresident return, resulting in zero tax liability.  Once you enter the amount mistakenly withheld from your paycheck for the nonresident state you will have a refund balance.

 




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