Do I Need to File a Nonresident State Tax Return?
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If you live in one state but earn money in another, chances are you’ll need to file a nonresident state tax return. This filing requirement ensures that states collect taxes on income generated within their borders, even if the taxpayer calls another state home.
For many people, this comes as a surprise. Maybe you worked temporarily in another state, had a side income from property there, or even collected winnings from a casino across state lines. Regardless of where you live, states generally want their share of taxes when income originates locally.
Common Situations That Trigger Nonresident Filings
The most typical reason for filing a nonresident return is wages earned in another state. If you commute across state lines for work or take on a temporary assignment, the state where you worked is likely to expect a return.
But wages aren’t the only income that matters. Rental earnings from an out-of-state property, gambling winnings or profits from selling property can all trigger a filing requirement. Business income from an S corporation or partnership that operates in another state also counts, as does beneficiary income from a trust or estate.
Even active-duty military members can face this rule if they earn non-military income outside their home state. Another common scenario is when an employer withholds taxes for the wrong state, which then requires corrective filings.
What you don’t have to worry about are things like interest income from an out-of-state bank account. That kind of income only goes on your federal and resident state return.
The Rules Aren’t the Same Everywhere
One of the trickiest parts of nonresident returns is that every state sets its thresholds. For example, Pennsylvania requires nonresidents to file if they make more than $33 in Pennsylvania-sourced income. Meanwhile, Missouri sets the bar at $600. This means the filing decision isn’t just about where you live and earn — it’s about how each state defines the threshold.
The best approach is to check directly with the state’s Department of Revenue. Most states have clear guidance for nonresidents and part-year residents.
Special Cases: Nonresident Aliens
For non-U.S. citizens, the situation can be even more complex. The IRS distinguishes between resident aliens and nonresident aliens based on factors like green card status and physical presence in the United States.
Resident aliens — those with green cards or who meet the substantial presence test — are taxed much like U.S. citizens. They must report worldwide income, though they may qualify for exclusions or credits to prevent double taxation.
Meanwhile, nonresident aliens are only taxed on U.S.-sourced income. This falls into two categories: income effectively connected with a U.S. trade or business, which is taxed at graduated rates, and FDAP (fixed, determinable, annual or periodical) income, which is typically taxed at a flat 30% unless a treaty lowers the rate.
If someone is considered both a resident and nonresident during the same year — say, when they first arrive or leave the United States — they must file a dual-status return.
Why This Matters for Your Finances
Ignoring nonresident filing requirements can result in penalties, interest and administrative headaches. However, being proactive has advantages. For example, many states offer credits to offset double taxation when both your home state and the nonresident state tax the same income. This means while you may file two returns, you’re not necessarily paying double.
The key is to understand where your income comes from and what each state requires. With so many rules varying by state and by taxpayer status, seeking professional guidance or at least checking official state resources can save both money and stress.
Bottom Line
If you earn money outside your home state, you may need to file a nonresident return. The rules differ from one state to another, and factors like income type, thresholds and even citizenship status can make a big difference. Knowing when and where to file can keep you compliant and help you avoid paying more than you owe.