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It is my understanding that if you move from one state to another mid-year, then, depending on the states and the details of the move, in each state, you are generally either taxed only on the exact income earned from the state you were a resident of for the period of the residency, or, alternatively (depending on the state) on the proportion of the total federal income as it relates to the income earned within the state.

What if one moves from Indiana to Washington within a single tax year? Will the income from Washington be subject to Indiana's state income tax?

What if the income in Washington is disproportionally larger (by several orders of magnitude in absolute terms, and by 2×–3× on per annum basis) than that in Indiana?

  • JoeTaxpayer♦, Why is there a dispute about the content of this post? – cnst Jun 26 '16 at 14:08
  • I do not know about Indiana, but Vermont and NY have the equivalent of a standard deduction and income that is not taxable in the state lowers how much of the deduction can be taken. (Roughly) With orders of magnitude difference you may find that your Indiana taxes are higher even if they don't tax your Washington income. – Shannon Severance Apr 16 '18 at 16:50
  • @ShannonSeverance Can you explain your last sentence. You seem to be saying if they tax their Washington income, and with all else being equal, they could pay less in taxes. I don't understand how taxing a larger portion of your income could ever mean paying less in taxes, if the only difference is the amount of income. – Tyler Apr 16 '18 at 21:03
  • @Tyler. Sorry, was unclear. Higher than if you had no Washington state income. Say one making only $A only in VT has to pay $B. Making $A in VT and X times $A in WA may result in VT taxes, (well) above $B, even though they are not "taxing" any of the WA income. Ditto NY. – Shannon Severance Apr 16 '18 at 22:28
  • @ShannonSeverance I'm not sure that's how it works. If you are paying more in taxes in VT because of the income you earned while living in WA, than they are "taxing" your WA income. If you are only paying taxes on what you made in VT, than it wouldn't matter what you made in WA, since your tax liability would only be the income you made while living in VT. I don't live in either state, so I'm not familiar with how they decide whether to tax all your income or just income earned while living in the state, but the only way you pay more is by having a larger income. – Tyler Apr 17 '18 at 14:41
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Its pretty clear, if you read the instructions (page 8):

Nonresidency and income taxable to Indiana A part-year resident owes tax on taxable income received from all sources while being a resident of Indiana. A part-year or full-year nonresident also owes tax on income from Indiana sources as listed below while a legal resident of another state. Indiana income includes income from the following sources:

  1. Winnings from Indiana riverboats and lotteries;
  2. Labor or services performed in Indiana, including salaries, wages, commissions, tips etc.;
  3. A farm, business, trade or profession doing business in Indiana;
  4. Any personal property located in Indiana;
  5. A partnership or an S corporation doing business in Indiana;
  6. Stocks, bonds, notes, bank deposits, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other property where earnings are a part of an Indiana business;
  7. Trusts and estates given to nonresident heirs; and
  8. Pensions and most interest and dividends are taxed by your state of residence when you receive them.

Note: If you were a full-year nonresident and your only income from Indiana sources was from pensions, interest and/or dividends (which were not a basic part of the business in Indiana) and/or unemployment compensation, you are not required to file an Indiana income tax return.

First you need to check if you're a part-year resident or a full-year resident (you may still be a full-year resident in Indiana even if you move away, on certain conditions).

If you're full year resident - Indiana taxes all income. If you're part year resident - you file form IT-40PNR, and follow the instructions in the booklet.

protected by Chris W. Rea Apr 16 '18 at 17:22

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