Working and living in seperate states.?

Question

I currently work in North Carolina but I reside in South Carolina, how am I supposed to do taxes so that I'm not having to pay income tax to both states? I will be filing joint taxes and have only worked in N.C. since May of 2007and my employer takes out N.C. income taxes for me but not S.C. taxes. I've worked in S.C. prior to May in 2007.

The only thing I can think of is filing taxes for N.C. as a non-resident and then filling the S.C. residential taxes. I will be going through H & R Block so I highly doubt they would know what to do any better than I do.

Thank you in advance for your help.

Answer 1

You will file a non-resident tax return for N.C., and a resident return for S.C. For N.C. you will pay taxes on the income you earned in N.C. For S.C. you will also pay taxes on the N.C. income, but S.C. will give you a credit for the tax liability for N.C. It won't be a $ for $ credit but will be the lessor of the N.C. tax liability or the S.C. tax on the N.C. income.

For example, if the N.C. tax on your N.C. income is $1,000 and the S.C. tax on the same N.C. income is $750, S.C. will give you a credit of $750. If the N.C. tax on your N.C. income is $750 and the S.C. tax on the same N.C. income is $1,000, S.C. will give you a credit for $750. What it boils down is the credit is for the lessor tax between the two states.

Answer 2

I use TurboTax, then get the copy for both states.

I suspect you only have to file in the state where you live though.

FYI: I have a cousin who lives near the border in a state with no state income tax, and works there, but does all her shopping in the adjoining state with no sales tax. Ahh, the best of both worlds!

Answer 3

You will have to file in both states, but your state of residence will give you credit for taxes on your wages paid to other states.