Do I need to file state taxes if I worked in multiple states in 2025?

by | Apr 24, 2025 | Individual Taxes, State Tax Filing

Here’s what HIVE AI had to say about “Do I need to file state taxes if I worked in multiple states in 2025?”:

Filing State Taxes When Working in Multiple States in 2025

If you worked in multiple states during 2025, you will generally need to file state tax returns in each state where you earned income, subject to certain exceptions and thresholds. Here’s a comprehensive explanation of your state tax filing obligations:

General Filing Requirements

For tax year 2025, most U.S. citizens must file a federal individual income tax return if their annual gross income is at least $15,000 (single filers) or $30,000 (married couples filing jointly). Meanwhile, each state has its own filing requirements for nonresidents. For example, in Colorado, nonresidents must file if they either receive any income from Colorado sources and are required to file a federal return, or if they earn enough Colorado-sourced income to incur a Colorado income tax liability, regardless of their total income. In states like Alabama, Arizona, Hawaii, Kansas, Massachusetts, and Mississippi, nonresidents must file if their income from state sources exceeds the state’s standard deduction, personal exemption, the sum of both, or another specified threshold after it has been prorated by the ratio of state-sourced income to total income from all sources. Tax Foundation

State-Specific Thresholds

Some states have very low thresholds for nonresident filing requirements. For example, Alabama’s administrative code states, “Every nonresident individual, receiving income from property owned or business transacted within Alabama, which is more than his prorated Alabama personal exemption is required to file a return.” Because full-year Alabama residents can claim a personal exemption of $1,500 (single filers), this means nonresidents can accrue this personal exemption at a rate of approximately $4 per day. As such, a single filer earning more than her prorated personal exemption (roughly $4 per day) in Alabama-sourced income is technically required to file a nonresident return to Alabama even if she does not owe income tax after her prorated standard deduction or prorated itemized deductions are taken into account. States that use their prorated standard deduction and/or personal exemption as the nonresident filing threshold save few, if any, nonresidents from having to file. Even in states that conform to the federal standard deduction ($15,000 for single filers in tax year 2025), the vast majority of nonresidents who travel for work will receive no benefit under such a threshold since most traveling workers work full time and earn substantially more than $41 per day. Tax Foundation

Avoiding Double Taxation

To prevent double taxation, every state that levies an individual income tax on wage and salary income offers a credit for taxes paid to other states. Typically, such credits offset the amount the taxpayer actually paid to the other state or the amount the taxpayer would have paid on that same income if taxed by the domiciliary state, whichever is less. This means when a portion of an individual’s income is taxable in two states, while that tax revenue may get allocated between the two states, the taxpayer’s total state income tax liability on that income will ultimately equal the amount he or she would have owed if taxed exclusively by the higher-tax state. For example, suppose Sarah lives in a state with a 4 percent income tax rate but commutes across state lines to work in a state with a 6 percent rate. Tax Foundation

Filing Considerations for 2025

Direct File Availability

For the 2025 tax filing season, eligible taxpayers in the following states can see if they’re eligible for IRS Direct File: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, Wyoming, Alaska, Connecticut, Idaho, Illinois, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin. More states have expressed interest in participating in Direct File in future years. If Direct File is not available in your state for the 2025 tax filing season, you should check back for updates. IRS – Publication 6035: IRS Direct File Media Guide

Filing Status Considerations

Married individuals should be aware that they are prohibited from filing (1) a joint return for purposes of a State tax if they file separate Federal income tax returns, or (2) separate returns for purposes of such State tax if they file a joint Federal income tax return. Tresuary Reg. 301.6362-7

If taxpayers who filed a married filing jointly return for the prior tax year file married filing separately returns for the taxable year for which the estimated tax payments are being calculated, special rules apply for calculating their required annual payments. Dawson U.S. Tax Court Opinions: James S. Plato

Special Situations

Military Personnel

Members of the armed forces receive special treatment under tax laws. The relief provided to any member of the Armed Forces by the Soldiers’ and Sailors’ Civil Relief Act is in no way diminished. Accordingly, for purposes of state tax, an individual shall not be considered to have become a resident of a State solely because of his absence from his original State of residence under military order. Moreover, compensation for military service shall not be considered as income derived from a source within a State of which the individual earning such compensation is not a resident. The preceding sentence shall not apply to nonmilitary compensation. Thus, for example, if an individual who is serving in State X as a member of the Armed Forces, and who is regarded as a resident of State Y under the Soldiers’ and Sailors’ Civil Relief Act, earns nonmilitary income in State X from a part-time job, such nonmilitary income may be subject to a qualified nonresident tax imposed by State X. Tresuary Reg. 301.6362-7

Employers with Employees in Multiple States

If taxable Federal Unemployment Tax Act (FUTA) wages were paid to employees in more than one state, Form 940 filers must complete and file Schedule A, Multi-State Employer and Credit Reduction Information. The Schedule A is also used to report wages paid in any state subject to credit reduction. IRS IRM 21.7.3 Unemployment Taxes

Conclusion

Working in multiple states creates additional tax filing obligations. You’ll generally need to:

  • File a tax return in your state of residence
  • File nonresident tax returns in any states where you worked and earned income (subject to each state’s filing thresholds)
  • Claim credits for taxes paid to other states on your resident return to avoid double taxation
  • Be aware of special rules that may apply to your specific situation

Given the complexity of multi-state taxation, consulting with a tax professional who specializes in multi-state taxation is highly recommended to ensure proper compliance with all state tax requirements.

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