Navigating Out of State Income Tax

Texas imposes NO state income tax on personal income

Good News !! There are no individual tax filing requirements in Texas.

Texas is one of the nine states in the United States that does not levy an income tax on its residents, thereby ensuring that your individual earnings remain untouched by income tax. The other states include; Alaska, Florida, Nevada, South Dakota, Tennessee, Washington, Wyoming, and New Hampshire (note: New Hampshire imposes a tax on investment earnings).

Contrasting Taxation Policies: On the other side of the spectrum are the other forty-one states and the District of Columbia, where income tax is applied to individual earnings. The rules and regulations surrounding income tax vary widely from one state to another, and residency for tax purposes is not merely determined by one's living situation. There are various factors that come into play including tax on in-state sourced income by out-of-state residents.

Residency Status: The process of determining one’s residency status can be quite intricate. Different states have unique criteria for defining residency. Some states, for example, consider the number of days one spends within their borders, while others, known as domicile states, have a more comprehensive set of regulations.

Complexities of Domicile States: Domicile states employ a more stringent set of criteria to determine one’s residency status, making it challenging for individuals with significant connections to the state to sever their residency ties. Factors that may be considered in determining one’s domicile status include home ownership, holding a state-issued driver's license, banking with local financial institutions, and being a registered voter. Domicile states typically require a more substantial burden of proof to establish a change in residency.

Texas Franchise Tax Filing Requirements: Note, that if you have formed a formal legal entity in Texas (partnership, LLC, LLP, S Corp, C Corp), you will be obligated to file an annual Texas Franchise Tax return. This applies to single-member LLCs that are considered disregarded tax entities filing their business taxes on Schedule C in their personal tax return.

Need to file a State income tax return outside of Texas? Navigating the complexities of out-of-state income taxes can be daunting. Fortunately, HOU.TAX is here to assist. We are not only experts in Texas tax law but also proficient in handling tax matters across state lines. Whether you have just relocated to Texas from another state or have sourced income in multiple states that require filing of state income tax returns, our CPAs are here to get you filed.

Need help with State Income Tax returns outside of Texas? ATX.TAX can help.