The rules and regulations regarding personal income taxes varies from state to state. If you commute across state lines for work, it can make huge changes on your personal income taxes.

Residency/Non-residency

If you’re living and working in different states, the location that you permanently reside in will be your place of residency. This is very important when filing your tax return. Thus, if you work in a state but don’t live there, you are considered a non-resident of that state. Most states will require you to file your tax return in their state, and pay the taxes on any income earned while you worked there.

Know the “First Day” Rule

Colorado and dozens of other states in the United States require you to pay taxes under the “first-day” rule. Thus, non-resident workers will owe these participating states taxes even if their work there only last a few short minutes.

Understand the State Waiting Period

This waiting period allows non-residents to earn income in the state for a specific period of time before subjecting that income to taxation. States like: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming allow a non-resident to work for 10 to 60 days.

Earned Income Threshold. A few states have earned income thresholds instead of a waiting period. This means that you could earn $300 to $1,800 a year before becoming subject to their own state income taxes.

Working in a Tax-free State Is Still Taxing

There are seven U.S. states that do not withhold income tax including Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. However, if you live in a state that withholds income taxes, then you will pay the full amount, regardless of where you earned it, to your own state.

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