Living in a tax-free state doesn’t mean you aren’t responsible for income taxes if you work in a bordering state.
Texas is an income tax-free state. Fantastic, right? It is for residents of Texas who both live and work in the state. For those that live in Texas but work in bordering states such as Louisiana, New Mexico or Oklahoma, there is an income tax to pay.
If you live in Texas but work in a different state, it’s best to learn the income tax details of the state you work in and the importance of filing a non-resident return for that state.
I Live in Texas but Work in Louisiana
If you work in Texas but travel to Louisiana for work, you will need to file a non-resident state return for Louisiana reporting all income earned from Louisiana sources.
Personal Louisiana Income Tax Rate:
Single Taxpayers:
- 2% on the first $12,500 of taxable income
- 4% on taxable income between $12,501 and $50,000
- 6% on taxable income of $50,001 and more
- For those married filing jointly, the rates are the same, the income brackets are just doubled.
For more on Louisiana’s income taxes, visit the Louisiana Department of Revenue website
I Live in Texas but Work in New Mexico
If you are one of the many people that lives in the Lone-star state but travels to New Mexico for work, you will need to file a non-resident state return for New Mexico reporting all income earned from New Mexico sources.
Personal New Mexico Income Tax Rate:
For Single Individuals:
- 1.7% on first $5,500 of taxable income
- $93.50 plus 3.2% of excess of income over $5,500 and below $11,000
- $269.50 plus 4.7% of excess of income over $11,000 and below $16,000
- $504.50 plus 5.7% of excess of income over $16,000
For married filing jointly:
- 1.7% on first $8,000 of income
- $136 plus 3.2% of excess of income over $8,000 and below $16,000
- $392 plus 4.7% of excess of income over $16,000 and below $24,000
- $768 plus 5.7% of excess of income $24,000
For married filing separately:
- 1.7% on first $4000 of income
- $68.00 plus 3.2% of excess of income over $4000 and below $8000
- $196 plus 4.7% of excess of income over $8000 and below $12,000
- $384 plus 5.7% of excess of income over $12,000
For more on New Mexico’s income taxes, visit the New Mexico Taxation and Revenue Department website
I Live in Texas but Work in Oklahoma
If you live in Texas but make frequent visits to Oklahoma for work, you will need to file a non-resident state return for Oklahoma reporting all income earned from Oklahoma sources.
Personal Oklahoma Income Tax Rate:
Oklahoma cut income tax rates in 2009 by more than 20%.
For single taxpayers and couples filing separately:
- 0.5% on the first $1,000 of taxable income.
- 1% on taxable income between $1,001 and $2,500.
- 2% on taxable income between $2,501 and $3,750.
- 3% on taxable income between $3,751 and $4,900.
- 4% on taxable income between $4,901 and $7,200.
- 5% on taxable income between $7,201 and $8,700.
- 5.25% on taxable income of $8,701 and above.
For married joint filers, heads of households and qualifying widows/widowers:
- 0.5% on the first $2,000 of taxable income.
- 1% on taxable income between $2,001 and $5,000.
- 2% on taxable income between $5,001 and $7,500.
- 3% on taxable income between $7,501 and $9,800.
- 4% on taxable income between $9,801 and $12,200.
- 5% on taxable income between $12,201 and $15,000.
- 5.255 on taxable income of $15,001 and above.
For more on Oklahoma’s income taxes, visit the Oklahoma’s tax commission website
How Do I File If I am married and work in a different state than my spouse?
If you live in an income tax free state (like Texas) and your spouse works in a state with income taxes while you do not, you can file a joint federal tax return with your spouse and file separate state returns.
Don’t forget to File Federal Taxes along with your Non-Resident State Taxes!
Living in Texas may mean you aren’t in tune with the state income taxes of your neighboring states. If you are just starting a job in one of these states while still holding residency in Texas, you’ll still have to pay state taxes. You can get started on both your federal and state taxes and file your taxes anytime with RapidTax.
Photo via M Glasglow on Flickr
What if I live in Texas and work in PA? do I get any of the state income tax back that I pay in PA? TIA.
Hi KR,
This will depend on whether you are travelling to PA to physically work there or you are working remotely from Texas for a company headquartered in PA. Depending on which case applies to you, I suggest checking out our blog post about working remotely OR our post about living in one state and working in another.
What if you live and work in Texas, but your wife worked in another state. You make much more money than her. Will your larger income be taxable in the other state even though you personally have no connection to it?
Hi Shaun,
In this type of situation, it may be more beneficial to file a joint federal tax return and separate state tax returns. When a joint return in filed, both incomes are considered as one and one AGI is calculated. If one spouse earns a higher income in a state with no income tax, then they do not want to be taxed on a combined adjusted gross income (AGI) from another state. At the same time, the lower earning spouse will not want to be taxed higher on a higher (combined) AGI.
Hello,
I retiring from the Army my self and wife are residents of Texas want to buy house in Texas but work in Louisiana. How will that work for my retirement? Will I be considered retired in Texas?
Thank you,
Woodywood
Hi Woody,
The first thing you’ll need to do is research how your retirement plan will work (each is slightly different and the answer will strongly depend on this). Many states will provide a relief for retirement income so you need to check with your specific state department of revenue. Some states exempt public pensions, but tax private pensions; or exempt public pensions earned in that state, but not public pensions earned in another state, etc.
Will I get a refund from NM if I pay tax there but live in Texas. My accountant said I will get a portion back because I do not live there. Is this right? I work in the oilfield and have paid a substantial amount in NM state tax.
Hi Ryan,
You are generally responsible for taxes in the state where you physically earn an income and the state where you reside. In your case, Texas is income tax free so you are not responsible -for any tax there. When it comes to New Mexico, you will need to file a non-resident state tax return since you were physically working there and earning an income. You may get a refund depending on how much was withheld from your paychecks over the year. However, you are still responsible for tax there (so you won’t be refunded all tax withheld back) since there is no reciprocal agreement between Texas and New Mexico. You can read more in a specific article for taxpayers who live in Texas and work elsewhere here.
What if you live in Texas but work remotely for company whose offices are located in a different state? would income taxes and filing to the other state be required?
As a general rule, you have to file a resident tax return in the state where you lived, a part-year resident return in any state you moved to/from, and a nonresident return in a state where you earned money but didn’t live. However, since you are a resident of Texas which has no income tax, you do not need to file a resident tax return.
Take note: it doesn’t matter where your company is located. If you didn’t live in a state, and you physically did not work there, you don’t have to file a return there just because the company paying you is based there, although you do if they accidentally withhold taxes for that state.
What if your company is from New Mexico but we work in Texas and are residents of Texas. Can they take out New Mexico withholdings?
Hi Raquel,
You are responsible for state taxes where you reside and where you physically work (not where your company headquarters is located). Since your company is withholding from New Mexico, you will file a New Mexico non-resident state tax return to be refunded that money for taxes you paid unnecessarily.