I'm living in AZ and working in CA. Do I pay income taxes to both states?

Question

I'm a Locum Tenens employee working in California while maintaining my tax home in Arizona. I imagine I file non-resident CA income taxes, but do I also have to file AZ state taxes? Doesn't seem fair if I have to pay twice!

Answer 1

You file a non-resident return for CA, and a resident return for AZ, you will be taxed in both states on the income that you earned in CA, but AZ will give you a credit for taxes paid to CA. It won't be a $ for $ credit though, but will be the lower of the tax liability to CA or the AZ tax on the CA income. (if your CA tax liability is 1,000 and the AZ tax on the CA income is 750, then your credit would be 750. If your CA liability was 750 and the AZ tax on the CA income was 1000, then your credit would be 750.)

Answer 2

Unless there is a reciprocity agreement between the two states you'll have to file returns in both states. AZ and CA to not appear to have an income tax reciprocity agreement in place.

You'll file a non-resident return in CA listing only the income earned in CA and pay any tax due. Then you'll file a resident return in AZ listing all income from all sources. You'll get a credit on your AZ return for the income taxes paid to CA. This has the net effect of taxing you at the higher of the 2 states' rates for the CA income. You are not taxed twice.

Answer 3

You likely have misused the term "tax home". Your tax home is where you make the greater portion of you income. In this case it may be CA. However that has little to do with your question. You must file a tax return in both states. You report the CA income on a Nonresident return and report your AZ income (which may be zero) on a AZ resident return. If you don't file an AZ return they will get your federal return from the IRS and come after you for the total income including the CA.

Answer 4

living az working ca pay income taxes states

Answer 5

whatever your home of record is, meaning wherever you have a drivers license is where you pay taxes. You will not have to pay for both states just whatever you are a residents of; regardless of where you work.