Double taxes? Really?
December 30, 2013 5:59 PM Subscribe
If a person lives* in Washington state but works** in Oregon, to which state does she pay state income tax? Oregon, Washington, or both?
*Lives there full time in a real apartment.
**Works there, full or part-time, for a large company.
My niece-in-law won't apply for jobs across the state line, partly because of 'double taxes'. Is this a real thing?
*Lives there full time in a real apartment.
**Works there, full or part-time, for a large company.
My niece-in-law won't apply for jobs across the state line, partly because of 'double taxes'. Is this a real thing?
Washington State has a regressive sales tax, but no income tax.
Oregon has an income tax, but no sales tax.
posted by mmdei at 6:03 PM on December 30, 2013 [1 favorite]
Oregon has an income tax, but no sales tax.
posted by mmdei at 6:03 PM on December 30, 2013 [1 favorite]
Well, WA doesn't have income tax, so....
posted by tristeza at 6:03 PM on December 30, 2013 [1 favorite]
posted by tristeza at 6:03 PM on December 30, 2013 [1 favorite]
Washington doesn't have an income tax so she'd pay income taxes in Oregon. (I think this would apply even if Washington did have an income tax.) Washington does have relatively high sales tax so she may be thinking of that as double taxes.
posted by macfly at 6:03 PM on December 30, 2013
posted by macfly at 6:03 PM on December 30, 2013
She files her taxes in the state she lives in: where she works is immaterial.
posted by easily confused at 6:08 PM on December 30, 2013 [1 favorite]
posted by easily confused at 6:08 PM on December 30, 2013 [1 favorite]
Easily Confused is confused. Washingtonians who work in Oregon pay personal income tax to Oregon.
posted by mmdei at 6:09 PM on December 30, 2013 [13 favorites]
posted by mmdei at 6:09 PM on December 30, 2013 [13 favorites]
I've been in the same situation. She'll file federal taxes AND Oregon state income tax. She won't pay the same amount of state income tax as residents of Oregon.
posted by Cloudberry Sky at 6:10 PM on December 30, 2013
posted by Cloudberry Sky at 6:10 PM on December 30, 2013
This isn't the issue in your niece's case, since Washington doesn't have income tax, but if you earn income in one state while living in another (and they both have income tax), you file tax returns in both states and the fact that you paid tax in one state is taken into account in the other tax return. I don't know of any states where they would expect you to pay the full amount of tax to both states.
I think maybe your niece is thinking of Washington's high sales tax as being functionally equivalent to paying income tax in both states.
posted by mskyle at 6:19 PM on December 30, 2013 [3 favorites]
I think maybe your niece is thinking of Washington's high sales tax as being functionally equivalent to paying income tax in both states.
posted by mskyle at 6:19 PM on December 30, 2013 [3 favorites]
If she worked in Oregon, she'd have to pay an income tax. She doesn't do that now.
posted by mr_roboto at 6:29 PM on December 30, 2013
posted by mr_roboto at 6:29 PM on December 30, 2013
Response by poster: Ah, ha.
Thanks guys.
It's one of those situations where she's saying 'help, help, I can't find a job!,' but sems to have a quick reason why everything won't work. I don't know her well and want to tread carefully but supportively.
This helps a lot.
posted by SLC Mom at 6:29 PM on December 30, 2013
Thanks guys.
It's one of those situations where she's saying 'help, help, I can't find a job!,' but sems to have a quick reason why everything won't work. I don't know her well and want to tread carefully but supportively.
This helps a lot.
posted by SLC Mom at 6:29 PM on December 30, 2013
Well speaking as someone who did this for years, it sucks. Washington has sales tax which you're already paying since you live there, higher vehicle registration fees you must pay, and the same job you could do in Vancouver comes with a 9% pay cut if it's across the river in Oregon (that's roughly the income tax rate in OR). Plus the commute SUCKS no matter what.
Whatever she does, I recommend NEVER working in both states in one year. The tax returns that year were beyond absurd.
posted by peep at 6:54 PM on December 30, 2013 [1 favorite]
Whatever she does, I recommend NEVER working in both states in one year. The tax returns that year were beyond absurd.
posted by peep at 6:54 PM on December 30, 2013 [1 favorite]
My dad used to work across state lines, and I have students that live in Oregon and interned over the summer in California. They do in fact get double taxed. State taxes do account for the fact that you're paying two taxes, but only in the sense that they won't look at the income you needed just to pay tax to the OTHER state.
It sucks, but still attractive if the alternative is not earning any money at all*. Moreover, the Washington part of the Portland Metro area is not all that large, so if you live on that side, not considering employers across state lines is writing off huge swaths of the market.
You would probably just want to move if you lived in Vancouver and worked in Beaverton. And hey, guess what, it's really easy to move when you rent. If tax jurisdiction is a genuine issue, and you really liked this person, offer to celebrate them starting a new job by helping them move, or to cover any security deposit they have to surrender by breaking lease.
*Unless of course, mom and dad are happy picking up the bills.
posted by pwnguin at 7:04 PM on December 30, 2013 [1 favorite]
It sucks, but still attractive if the alternative is not earning any money at all*. Moreover, the Washington part of the Portland Metro area is not all that large, so if you live on that side, not considering employers across state lines is writing off huge swaths of the market.
You would probably just want to move if you lived in Vancouver and worked in Beaverton. And hey, guess what, it's really easy to move when you rent. If tax jurisdiction is a genuine issue, and you really liked this person, offer to celebrate them starting a new job by helping them move, or to cover any security deposit they have to surrender by breaking lease.
*Unless of course, mom and dad are happy picking up the bills.
posted by pwnguin at 7:04 PM on December 30, 2013 [1 favorite]
Lots of folks do this, and I suspect, if she's living in Vancouver, your niece is hearing about how terrible Portland is, how awful the double taxing is, etc. But lots of folks do this, so they're obviously choosing this commute and tax situation instead of living in Oregon.
I wouldn't want that commute, but I'd rather have a bad commute than no job.
posted by bluedaisy at 7:09 PM on December 30, 2013
I wouldn't want that commute, but I'd rather have a bad commute than no job.
posted by bluedaisy at 7:09 PM on December 30, 2013
I wasn't suggesting it was so bad it's better not to work. Just that if it was me, I'd be spending the vast majority of my efforts finding a job in Washington.
posted by peep at 7:15 PM on December 30, 2013
posted by peep at 7:15 PM on December 30, 2013
She files her taxes in the state she lives in: where she works is immaterial.
In case anyone missed mskyle and others saying it above this is not true at all, it is by no means immaterial. Unless something has changed drastically since the last time I've encountered it, the state where you work could quite possibly be removing money from your paychecks and you would have to file taxes there to mitigate that or recover it.
posted by XMLicious at 7:26 PM on December 30, 2013 [2 favorites]
This is pretty darn common. A good portion of the NYC workforce commutes in from New Jersey and Connecticut. Think about a pro athlete that plays half her games on the road. You file in all the states, but you get credit on your home state's taxes for taxes paid in other states. You are not double taxed, but you could conceivably bring your marginal tax rate up to a level that is higher than your home state.
posted by JohnnyGunn at 8:47 PM on December 30, 2013 [3 favorites]
posted by JohnnyGunn at 8:47 PM on December 30, 2013 [3 favorites]
state income tax will be withheld from an oregon paycheck, necessitating a filing to recover (some of) it, but washington residents get some kind of a break. oregon's last republican candidate for governor was a former portland trailblazer (yes, the nba team) who lived in washington during his million$/year period for the tax break, and i was not the only voter who disapproved of it.
posted by bruce at 12:49 AM on December 31, 2013
posted by bruce at 12:49 AM on December 31, 2013
My dad used to work across state lines, and I have students that live in Oregon and interned over the summer in California. They do in fact get double taxed. State taxes do account for the fact that you're paying two taxes, but only in the sense that they won't look at the income you needed just to pay tax to the OTHER state.
Unless there's something specific to California or Oregon, this isn't the case. I think you want to read page 31 of that booklet. If I've read it correctly, you pay Oregon tax on all money earned in Oregon (i.e. what's on her W-2, I think) and then you get credit for X% of your Oregon tax if X% of your (Oregon) income was taxed by another state (but if you live in Washington, X is 0).
posted by hoyland at 5:32 AM on December 31, 2013
Unless there's something specific to California or Oregon, this isn't the case. I think you want to read page 31 of that booklet. If I've read it correctly, you pay Oregon tax on all money earned in Oregon (i.e. what's on her W-2, I think) and then you get credit for X% of your Oregon tax if X% of your (Oregon) income was taxed by another state (but if you live in Washington, X is 0).
posted by hoyland at 5:32 AM on December 31, 2013
Again, this is common. I get to file in 3 states this year! DC resident, moved to VA, worked in MD the whole time. Wheeeee! The form for a non-resident is very easy. 5 minutes and a stamp.
You won't owe double taxes, but if she isn't savvy she might have double state withholdings. You do need to file a W4 for your resident state and working state. In your working but non-resident state (for me this is Maryland) you get to write "EXEMPT" and have no withholdings. Of course, if you screw this up, you can file to get your withholdings back.
Anyways, it's a pretty lame excuse for not getting a job. "Double taxes" or not is better than zero income. And a crappy commute is better than getting sucked into long-term unemployment.
posted by fontophilic at 5:38 AM on December 31, 2013
You won't owe double taxes, but if she isn't savvy she might have double state withholdings. You do need to file a W4 for your resident state and working state. In your working but non-resident state (for me this is Maryland) you get to write "EXEMPT" and have no withholdings. Of course, if you screw this up, you can file to get your withholdings back.
Anyways, it's a pretty lame excuse for not getting a job. "Double taxes" or not is better than zero income. And a crappy commute is better than getting sucked into long-term unemployment.
posted by fontophilic at 5:38 AM on December 31, 2013
Usually when this problem comes up, it is quickly centered on Vancouver, Washington, the lesser known of the two cities founded around the Vancouver Trading Company. It is on the state border (Columbia River) and across the I-5 bridge from Portland, and is generally considered a bedroom community of Portland. Residents of both cities there can definitely shop in Oregon to save the sales tax, and when possible work in Washington to avoid state income tax.
The law only cares if you try to evade taxes by, say, registering your car in the other state with the cheaper fees, or doing something hinky to establish residency in the other state to get that state's benefits/cheap tuitions/etc. That said, literally thousands of people work in one state while living in the other; some of them get the tax benefit in their favor while others don't, but none of them get double income tax.
The only people who are ever taxed on money on which they've already paid income taxes are the deceased. It's great that you're being supportive, but well, don't enable her limp excuses.
posted by Sunburnt at 3:43 PM on December 31, 2013
The law only cares if you try to evade taxes by, say, registering your car in the other state with the cheaper fees, or doing something hinky to establish residency in the other state to get that state's benefits/cheap tuitions/etc. That said, literally thousands of people work in one state while living in the other; some of them get the tax benefit in their favor while others don't, but none of them get double income tax.
The only people who are ever taxed on money on which they've already paid income taxes are the deceased. It's great that you're being supportive, but well, don't enable her limp excuses.
posted by Sunburnt at 3:43 PM on December 31, 2013
Response by poster: Thanks again everyone.
A couple of notes: I recognize the difference between where one files tax returns and where one actually has to pay taxes. Witholdings may be refunded, etc. There was a bit of confusion or overlap above I think.
And, I asked so that I'll be able to gently encourage her to expand her search, definitely not to enable. She is willing, but doesn't have a lot of experience, or guidance as she gets started in life. I certainly agree that any job is better than none, and want to suggest that to her. Gently.
You guys are great!
posted by SLC Mom at 10:16 AM on January 1, 2014
A couple of notes: I recognize the difference between where one files tax returns and where one actually has to pay taxes. Witholdings may be refunded, etc. There was a bit of confusion or overlap above I think.
And, I asked so that I'll be able to gently encourage her to expand her search, definitely not to enable. She is willing, but doesn't have a lot of experience, or guidance as she gets started in life. I certainly agree that any job is better than none, and want to suggest that to her. Gently.
You guys are great!
posted by SLC Mom at 10:16 AM on January 1, 2014
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posted by leitmotif at 6:02 PM on December 30, 2013 [7 favorites]