Tax Advice: State Income Tax Debate Explained

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Thanks to the COVID-19 lockdowns, many people worked from home. The only problem is that “home” may not have been their actual place of residence.

Tons of people fled their home states for safer locations, access to medical care or even warmer weather. Regardless of the reason, the state you spent the majority of 2020 in may want you to pay taxes.

The problem is we just don’t know the answer to that yet. “You may be on the hook for taxes in two states,” says Lisa Greene-Lewis TurboTax ( (INTU) - Get Report) expert and CPA.

Here are some things we do know:

  • File a separate state tax return for your state, which is different from your federal Form 1040 – U.S. Individual Income Tax Return.
  • You may have to file more than one state tax return if you earned income in different states.
  • Some states have different credits and deductions than the federal Form 1040 so take care when you file.

We also know that some states have reciprocal agreements, which means you may not have to pay taxes to both states if there is an agreement in place.

But deciding which state you owe tax to will be based on the IRS’ determination. “The main thing that the IRS looks at is how long you've been in the state -- that is not your home state,” says Greene-Lewis. Uncle Sam counts your days in a particular state. “If you've been in another state for over 183 days, you may be on the hook for taxes in that state.”

But be sure to watch the video above for more details or get more advice from Greene-Lewis. So far, her tax tips included: The Stimulus Pkg and Your Taxes, Tax Deductions for Gig Economy Workers, Tax Deductions for Parents With Children, Crypto Investors, and, of course, The Most Overlooked Tax Deductions.

And, of course, be sure to stay tuned to TheSreet for state tax updates.

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