Author Topic: Income Taxes When You Work In One State and Live In Another  (Read 5436 times)

A_Rock

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Income Taxes When You Work In One State and Live In Another
« on: March 23, 2016, 01:14:33 PM »
OK here is the deal.  I live in New Jersey and work in Delaware.  Per my W-2, I made $56,000 and paid $2,200 in income tax to the state of Delaware.  I did my taxes online using H&R Block.
 
Result:  Federal refund of $360, Delaware refund of $130.  And I owe New Jersey $1,500!! 

Is this right?  I did some googling and it seems like New Jersey allows you to count your credit of taxes paid elsewhere?  But after that (in my case, $2200) is deducted, I still have to pay taxes on the rest?  I am confused.  Does this seem right?  And if it is right, what should I do going forward?  Ask my boss to have NJ taxes taken out in addition to the DE taxes?

Thanks for any insight you can provide!

seattlecyclone

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #1 on: March 23, 2016, 04:34:40 PM »
This can be complicated, and depends on the laws in the two states in question. I've never lived or worked in Delaware or New Jersey. In the states where I do have experience, the state where I worked but didn't live charged tax only on income from that state. The state where I lived charged tax on all income, but gave a credit for taxes paid to other states. I think this is pretty standard.

Even if 100% of your income comes from out of state, this could still result in a tax liability to your state of residence if its tax rates are higher than the state where you work.

If you can have your company withhold taxes for New Jersey, you may want to pursue that. Otherwise look into just sending New Jersey a check periodically according to whatever schedule they require.

schmerna

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #2 on: March 24, 2016, 07:21:59 AM »
I am able to claim EXEMPT on my W-4 in the state where I work.  No state income taxes are withheld from my paycheck (quarterly estimates are required). I pay income taxes only in the state I reside. 

oldmannickels

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #3 on: March 24, 2016, 07:39:32 AM »
The New Jersey tax you are calculating seems high, but its hard to tell with limited info.

2200+1500= 3700

3700/56000 = 6.6% which is not your New Jersey rate based on that income.

Fuyu

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #4 on: March 24, 2016, 12:02:46 PM »
That seems really high? I live in NJ and work in NY. When I file taxes, the tax due to NJ is usually 100 - 200. My income from NY is over 56k. Did you have a lot of income in addition to your job, that might be why your NJ tax is so high.

A_Rock

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #5 on: March 24, 2016, 02:17:39 PM »
Thanks for the feedback from everyone so far! 

The only other income I have is from my rental property in Delaware.  But my rental property is a money loser and with my deprciation added in, I had a $3,000 loss. 


Cpa Cat

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #6 on: March 24, 2016, 02:31:33 PM »
There are a few things that could be happening.

1. The way credit for taxes paid in another state works is the home state calculates that credit based on what you would have paid if you'd earned the income at home. So it may not be exactly what you actually paid to another state, due to differences in tax rates.

2. Your credit for taxes paid in another state may not be flowing through to your NJ correctly. Are you actually able to preview the NJ return to confirm it's there?

3. You didn't actually pay $2,200 in tax to DE if you have a refund. $2,200 is your withholding per your W-2. But according to you, you have a refund from DE of $130. So you actually paid DE $2,070 in tax. Is a $2,200 credit for taxes paid what's actually showing on your return?

StarBright

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Re: Income Taxes When You Work In One State and Live In Another
« Reply #7 on: March 24, 2016, 03:04:35 PM »
I can't tell from your post if you are married or single - but filing married we had a very similar issue the last couple of years with taxes. The issue might be with HR Block.

My husband and I spent the last several years living in NC while I was paid in MD.

When it came to tax software (Turbo Tax) I found issues when dealing with multiple states. It would calculate my husband's NC income as taxable in MD and I never figured out a way around it. The turbo tax people couldn't help either. I had to just do the taxes by hand eventually.


 

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