Work in NC/live in TN...do I pay state income tax?

Question

I currently live and work in NC, but TN is about 20 miles away, so I was thinking about relocating to TN and still work in NC. Would I still have to pay NC State income tax? Or do I pay it, then get it back at tax time?

Answer 1

If you live in TN and have income, you must file a TN resident income tax return, even if that income is not from TN.

If you work in NC, you will have to file a NC Non-resident tax return and pay NC tax on the money you earned in NC.

On your TN tax return, you will get a credit for the taxes you paid to NC, so you will not be taxed twice. In the year that you move from one state to the other, you should file a "Part-Year" resident return for both states. Turbo Tax or Tac Cut can handle this situation with ease.

Which state has the lowest combination of income, sales and real estate taxes? That's where I would live, all things being equal.

On the other hand, I live and work in Maine and am taxed at a high rate for income, sales and real estate taxes. I could live and work in New Hampshire which has a MUCH lower tax structure, but I choose not to.  

Answer 2

You pay state income tax to the source of the money.