Navigate no-income-tax states, reciprocity agreements, multi-state filing, and strategies to minimize your state tax burden.
Nine states impose no state income tax on wages — assignments there mean one fewer return and more take-home pay.
*NH taxes dividends/interest only, not wages.
You'll generally file: (1) A resident return in your tax home state reporting ALL income. (2) A non-resident return in each state where you worked (if it has income tax). (3) Credits for taxes paid to other states to avoid double taxation.
Tax home in North Carolina, working assignments in Georgia (13 wks), Virginia (13 wks), Florida (13 wks). You'd file: NC resident return (all income, credits for GA/VA taxes), GA non-resident return, VA non-resident return, no FL return (no tax). That's 3 state returns plus federal.
Some states have agreements where residents working in the partner state only owe tax to their home state. Common pairs affecting travelers: Virginia/DC/Maryland/West Virginia, Illinois with neighboring states, Indiana/Pennsylvania with neighbors.
| Category | States | Top Rate |
|---|---|---|
| No Income Tax | AK, FL, NV, NH*, SD, TN, TX, WA, WY | 0% |
| Low (under 5%) | AZ, CO, ID, IL, IN, KY, MI, NC, ND, OH, OK, PA, UT | 2.5–4.95% |
| Moderate (5–7%) | AL, AR, CT, GA, IA, KS, LA, MA, MD, ME, MO, MS, MT, NE, NM, RI, SC, VA, VT, WI | 5.0–6.99% |
| High (7%+) | CA, HI, MN, NJ, NY, OR | 7.0–13.3% |
Remember: state tax only applies to your taxable wages — not stipends. A $2,000/week California assignment with $500 in taxable wages is only taxed on the $500.
Highest top rate (13.3%) and aggressive about claiming non-residents owe tax. Ensure bulletproof tax home documentation for CA assignments.
State taxes plus NYC city taxes (if assigned in NYC) add up significantly. Upstate assignments avoid the city tax.
Licensure compacts (PT Compact, OT Compact) allow multi-state practice but don't affect taxes. You still owe state income tax where you work regardless of compact status.
Choose your tax home state wisely — a no-tax state saves every year. Seek low/no-tax assignments when pay is comparable. Track work days per state carefully. File on time everywhere — penalties apply separately per state. Work with a multi-state CPA to ensure all credits are claimed.
Connect with travel therapy tax specialists.