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If I work in one state but live across the state line. Do I pay income taxes for the state I live in or work?


If I work in one state but live across the state line. Do I pay income taxes for the state I live in or work?

You income is subject to income tax LAWS in both states. If both states have income taxes, you will have to file tax returns in both states. Most states that have income taxes allow residents to claim a credit for taxes paid to another state for income earned in the other state. Ignore the comments about reciprocal agreements. The instruction for your home states tax return will explain what you need to know whether such an agreement exists or not. From my reading of several state tax forms, I doubt any such agreement exists or is required to claim the credit.
It depends on the state and what other income you may have. In most cases you may need to file a return in both states.
If the two states have a reciprocity agreement between them you will only need to file in your home state. Otherwise you'll have to file in both states. You'll file a non-resident return in the state where you work, listing only the income earned in that state. You'll then file a resident return in your home state, listing all income from all sources and take a credit for the taxes paid in the state where you work. This has the effect of taxing the income earned out of state at the higher of the two states' rates.
I did that for years. I worked in PA but lived in DE. PA has an agreementwith a lot of states that you only have to file where you live (a reciprocity agreement) but not with DE. I'd have to file a PA non-resident form and then file a DE resident form. Luckily, DE allowed a credit for what I paid to PA, but not the municipal portion, but I always ended up owing DE money.
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