<p>DS lives in State “A” (with us) but worked in State “B” this summer. Now that he’s back at school in State “C”, he’s working across the border in State “D” during the school year. When he filled out the W4 at this job, he listed State C as his address for income tax purposes. </p>
<p>Questions:
Was he correct to list the state where he attends school as his place of residence?
If it’s his choice (between States A and C), how can he figure out whether it would be more advantageous to list our home state for income tax purposes?
Will there be a simple way for him to complete his tax return next spring given this scenario?</p>
<p>Not a CPA … I don’t even play one on TV! But I am a worrywart about tax issues and I’ve had considerable experience filling out tax returns, so I’ll get the discussion started.</p>
<p>From a Federal Income Tax standpoint, it doesn’t much matter what state you son lists as “home.” From a State Income Tax standpoint, states get cranky when workers earn money in their state and don’t pay tax on it. And states in which people reside get cranky too if their residents don’t pay taxes. Many Connecticut residents work in NYC. They pay NY income taxes. And they are liable for CT income taxes as well. Fortunately the NY income taxes are a credit on the CT tax form.</p>
<p>As to your questions, I’d suggest you let your son do the requisite research to answer them. JMHO of course.</p>
<p>The easiest way to choose a home state is to answer these questions…“What state are you registered to vote in? What address is on my driver’s license?”</p>
<p>THAT is considered your legal home state.</p>
<p>You can’t just pick and choose which state you want to list as your home state based on favorable taxes…it has to be based on where your legal permanent residence is and for most folks that remains where they are registered to vote and have on their driver’s license.</p>
<p>msmayor is correct. State of legal residence is the state he should be listing. State of employment will probably still withhold their state taxes. Some states do have reciprocal agreements and will withhold taxes for the state of residence.</p>
<p>On his W2’s, look carefully at the state section–it will say to what state the income is taxed. Come tax time, he (or a preparer) will need to check every state in which he had wages and see if he is over the threshhold required to file. Will also need to file to obtain any refund of taxes owed–even if he were under the filing thresshold. It’s a <em>real</em> pain, and usually these W2’s are for a very minimal amount of earnings.</p>
<p>“THAT is considered your legal home state.”</p>
<p>Gee, I wish that was universally true. Move to New Hampshire for a couple of months, get licensed and registered to vote … and then I’d be free to move to some high-tax state with no worries about paying taxes (presuming my income isn’t earned there of course).</p>
<p>I’m not advocating being a scofflaw … but the gross differences in state tax laws don’t serve a mobile working population particularly well.</p>
<p>For State taxes the rules will vary a lot by State. In our state a resident has to report all earnings including those from a job in another State and they tax you on those earnings. If you have paid tax on those earnings in the other state then they give some sort of credit for those taxes. A non resident earning money in our State also has to file a tax return and pay taxes in our state.</p>
<p>This will vary by state. My daughter had a summer job in another state. They did not not require her to file a return with them as she was a non resident. So she only had to file the one state return (ours) and she paid taxes on the out of state income here. If her job had been in a state that did require non residents to file then she would have had to file a return in each state.</p>
<p>Are you planning to claim your son as a dependent on your federal tax returns? One of the qualifying criteria for claiming a child is that they reside with you for more than half the year. When a qualifying child is a full time college student they are considered to have lived with you when temporarily absent for education purposes. I am not sure if putting another State as their state of residence would complicate this - if they are saying his residence is another state then would the absence be considered temporary? Something you would need to check with an accountant if you plan to claim him. </p>
<p>Its not just as simple as you state re: New Hampshire. You can’t just move someplace else, live there all the time and continue to call New Hampshire your home. You would need to have an established residence…own a home or rent an apartment. You can have ‘temporary’ housing in another state (like a dorm room) but you must continue to have some ties to your ‘home state’ in order to benefit from any favorable tax laws.</p>
<p>If it were that easy, the half the country would be living in New Hampshire or Delaware.</p>
<p>“If it were that easy, the half the country would be living in New Hampshire or Delaware.”</p>
<p>I agree. But our posts have been overtaken by SwimCatsMom’s excellent summarization. (For Connecticut income tax purposes, the fact that my D has worked in Delaware the past two years and rented an apartment there the whole time is trumped by the fact that she was also a student at the University of Delaware. YMMV.)</p>