You can be a resident of two states but you may want to avoid it.
If your life mostly involves just one state, filing state taxes is relatively simple. When your life involves more than one state, things can get complicated pretty quickly.
Everything depends on residency. It determines where you have to file, what kind of return you have to file, and how much you’ll be taxed. The problem is, determining residency is more complicated than it sounds. The states have convoluted and differing definitions of what constitutes a resident.
Generally, you can only be a full resident of one state. Most filers who spend time in two states end up filing a resident return to one state and a non-resident return to the other.
Is this even possible?
Yes, it is possible to be a resident of two different states at the same time, though it’s pretty rare. One of the most common of these situations involves someone whose domicile is their home state, but who has been living in a different state for work for more than 184 days. In a situation like this it is conceivable that you could be the resident of two states.
Filing as a resident in two states should be avoided whenever possible. States where you are a resident have the right to tax ALL of your income. This is regardless of where it was earned. If you are a resident of two states, you will likely end up paying more in state taxes than if you were a resident of just one, or a resident of one state and a nonresident of another.
Check the definitions
The first thing to do if you think it’s possible that you could qualify as a resident in more than one state is to check the definitions of residency. Each state has its own definition of who constitutes a resident. It’s possible that, according to the exact definitions of the law, that you aren’t actually a resident of two states.
Generally you are considered a resident if your domicile is that state, or (if your domicile is another state) you maintained a permanent place of abode in that state and spent more than 184 days there during the year.
Most state tax authorities have a page explaining what exactly constitutes a resident in their state. If you can’t find a page on their website, try checking the tax return instructions themselves. Most include a section on residency.
Make sure you aren’t a nonresident
If you only worked in a state, or lived there for a brief amount of time – in a vacation home, for example – you likely aren’t a resident. In this case, you’d only file as a resident in your normal home state. You would then file as a nonresident in the other state only if you earned money there.
Make sure you aren’t a part-year resident
If you move from one state to another during the year, you’ll file as a part-year resident in both states. You’ll be treated as a resident of each state for only the days that you lived in that state. This will help you to avoid being double-taxed. Don’t make the mistake of filing as a resident in both states if you permanently left one state and moved to another.
Exemptions for students, military personnel, expats, etc.
Most states also have exemptions for students who attend college out-of-state as well as members of the military and their spouses who often have to move from one state to another. These people are generally considered residents of their home states.