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Multi-state households: hire an accountant the first year: filing jointly federally can force a joint state return too
If you lived in different states, or one of you commutes across a state line for work, your first tax year as a married couple is more complicated than you'd expect.
The core of the problem
Some states require that if you file jointly federally, you must file jointly at the state level too.
The consequence is that a joint return can pull the other state's income into the taxable baseIncome you earn working in State A gets taxed by State B just because your spouse lives there.
Rules differ by state (some allow a joint federal return with separate state returns; some tie the two together), so there's no universal answer.
Common scenarios
1. You end up in the same state, but only moved mid-year
One of you is a part-year resident that year, files in both states, and allocates income by period of residence.
2. You live in two states (a commuter marriage)
Each of you is a resident of your own state, but the other state may treat you as a non-resident or pull you in under joint-filing rules. This is the most complicated case.
3. One of you commutes across a state line
Your state of residence differs from your state of work. Usually the work state taxes first and the residence state gives a credit (credit for taxes paid to other states), but the credit doesn't always offset it fully.
Also check whether the two states have a reciprocity agreement(reciprocity agreement), under which only your state of residence taxes you. Having one makes things much simpler.
One more layer: community property states
If one of the states is a community property state (see item 73 of the checklist) and you file separately, income has to be split in half, which makes separate filing quite technical.
And if you're considering separate filing because of student loans (see item 62 of the checklist), the two issues tangle together.
The recommendation: hire an accountant the first year
This isn't laziness, it's value.
Multi-state filing has many variables and wide differences between states, tax software handles multi-state situations only so well, and errors can be pursued years later. An accountant's fee is usually a few hundred dollars, far below the cost of getting it wrong.
Once you've been through it once, the following years are much easier to do yourselfThat way, you'll know which forms to file and how income gets allocated.
What to gather beforehand
- Both W-2s (which show state withholding)
- Moving dates (if you moved)
- Start and end dates of residence in each state
- Last year's returns for both of you
While you're at it: adjust withholding
People working across state lines very often have their state withholding set wrong, especially after a move or a job change. That's separate from the federal W-4, so check both (see item 75 of the checklist).
In one line
Pay an accountant in a multi-state household's first year, because in some states filing jointly federally drags the other state's income in with it.