When you live in one state and work in another, the state where you work can usually tax the wages you earn there, and your home state can tax all of your income. To keep you from paying twice on the same pay, your home state generally gives you a credit for the tax you paid to the work state. The result: you typically end up paying roughly the higher of the two states' taxes, not both added together.
There are important exceptions. Some neighboring states have reciprocity agreements, and if either state has no income tax, the picture changes completely. This guide explains how live in one state, work in another taxes work in each situation, with paycheck numbers to show the difference.
The basic rule: two states, two claims
States tax income in two ways:
- Your resident state taxes all of your income, wherever you earn it.
- A nonresident state taxes only the income you earn within its borders, such as wages for work you physically do there.
When you commute across a state line, both states have a claim on the same paycheck. The usual fix is a credit on your resident state return for income tax paid to the other state. That credit is generally limited to what your home state would have charged on the same income, so it can reduce your home-state tax on those wages to zero, but not below.
Four common situations
| Your situation | Who taxes your wages | What you usually file |
|---|---|---|
| Live in a no-tax state, work in a taxing state | The work state | A nonresident return in the work state |
| Live in a taxing state, work in a no-tax state | Your home state | Your resident return only |
| Both states tax wages, no agreement | Work state first, home state collects any difference | A nonresident return and a resident return claiming a credit |
| Both states tax wages, with a reciprocity agreement | Your home state only | Usually just your resident return |
The nine states without a wage tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Reciprocity is covered in depth in our guide to state tax reciprocity agreements.
Worked example: living in Washington, working in Oregon
Washington doesn't tax wages, but Oregon taxes nonresidents on wages earned in Oregon. Take a married couple filing jointly with $75,000 in wages from one Oregon job, paid biweekly (26 paychecks), living across the river in Washington.
| Per paycheck | Job in Oregon | Same job in Washington |
|---|---|---|
| Gross pay | $2,884.62 | $2,884.62 |
| Federal income tax | $178.46 | $178.46 |
| Social Security | $178.85 | $178.85 |
| Medicare | $41.83 | $41.83 |
| State income tax | $188.59 (Oregon) | $0.00 |
| State payroll items | $2.88 (Oregon transit tax) | $16.73 (WA Cares) |
| Net pay | $2,294.01 | $2,468.75 |
These are estimates. The Oregon figure treats all household income as Oregon wages and is likely a bit high, because our calculator doesn't apply Oregon's partial subtraction for federal tax. Paid Leave Oregon and Washington's family leave premium aren't included. Even so, the difference is large: living in a no-tax state doesn't shield wages earned in a state that taxes them. Our Washington vs. Oregon take-home pay comparison goes further.
How the credit works when both states tax wages
Here is a simplified illustration. Say you live in State A and work in State B, and on your $55,000 salary:
- State B, where you work, charges $1,686 on those wages.
- State A, your home state, would charge $2,232 on the same wages.
You pay State B its $1,686. State A then gives you a credit for that amount and collects only the difference, $546. Your total state tax is $2,232, the same as if you had worked at home.
Now flip it. If the work state charged more than your home state, your home state's credit would wipe out its own tax on those wages, and you'd pay the work state's higher amount. Either way, you generally pay the higher of the two, not the sum. (The dollar amounts above are our calculator's single-filer estimates for North Carolina and Georgia at $55,000, used only for scale. Real credit calculations have more steps.)
What happens to your withholding
Your employer usually withholds tax for the state where you work. If you live in a different state that also taxes wages, a few things can happen:
- Your employer withholds only for the work state, and you make estimated payments to your home state for any difference.
- Your employer withholds for both states, if it's set up to do so.
- Under a reciprocity agreement, you give your employer a form and it withholds for your home state instead.
If too little goes to your home state, you may owe a balance when you file. The IRS's estimated tax page explains the federal side; your home state has its own rules for estimated payments.
Don't forget local taxes
Cities and counties can have their own cross-border rules. Some local taxes apply where you work, some where you live, and some to both. If you commute into or out of places like Ohio cities, Pennsylvania municipalities or New York City, check the local rules too.
Estimating your paycheck when you cross a state line
Our paycheck calculator computes one state at a time. For a commuter, the most useful approach is to run the work state first, since that's what your employer usually withholds, then compare it with your home state. The higher of the two is a reasonable rough estimate of your total state tax. You might start with the Oregon paycheck calculator and the Washington paycheck calculator, or pick from the full state list.
If your work location changes, for example you go remote or move, see remote work and state income taxes and moving states mid-year. For your specific return, check both states' revenue departments or a tax professional.
Frequently Asked Questions
Do I pay taxes in both states if I live in one and work in another?
You may file in both, but you usually don't pay full tax twice. Your home state generally credits the tax you paid to the work state.
Which state gets my taxes if I live in a no-tax state?
The state where you work, if it taxes wages. Living in a state like Washington or Florida doesn't exempt wages earned in a taxing state.
What if I live in a taxing state and work in Texas?
Texas doesn't tax wages, so only your home state taxes that income. Your employer may not withhold for your home state, so you may need to arrange withholding or make estimated payments.
What is a reciprocity agreement?
It's an agreement between two states that lets residents of one work in the other and pay income tax only to their home state.
Sources
- Tax Foundation: State Individual Income Tax Rates and Brackets, 2026
- IRS: Estimated Taxes
- IRS Publication 505, Tax Withholding and Estimated Tax
Run the numbers for your state
Written and checked against IRS, Social Security Administration and state tax agency publications for the 2026 tax year. General information, not tax, legal or financial advice. Read our editorial policy, calculation methodology and sources.