[Nicole502]

Hello. My husband and I live in Louisville, KY. My husband is an audio engineer and works for a band from Florida. He has worked for them for 18 months. They do not withhold any state tax from his payroll. We have paid KY tax on his earnings when we file our taxes every year. My husband was laid off by the band in January and applied for unemployment in KY, and we were told he had no taxable income in KY, even thought the time they were usung he had made nearly $45,000, and we had paid state tax to KY on that amount when we filed our 2007 KY state taxes. He then filed for unemployment in FL, and was approved, because that is the state where the band is from and pays their unemployment taxes. So my question is this: Should we be paying KY state tax on his income or FL state tax? Any information would be greatly appreciated. Thanks!

Nicole

[Justwantfair]

You should have been/should be paying FL. You pay for the state you work in, not where you live.

[AtlantaTaxExpert]

Sorry, Justwantfair, but that is NOT accurate.

You pay state taxes in the state you work AND in the state where you live.

The normal course of action is that you have the employer withhold the tax for the state where the work is performed, and you file a state tax return and actually PAY that (working) state tax.

Then, when you file the state tax return where you LIVE, you claim a credit (normally dollar-for-dollar, but not always) for the taxes paid to the WORKING state. This avoids (for the most part) being double-taxed by two different states on the same earned income.

If the working state tax rates are HIGHER than the living state rates, the taxpayer usually pays ZERO tax to the living state.