State Income

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Some states don’t require that you have to pay a state tax -- isn’t that lucky? Louisiana isn’t one of those states though, nor are we one of the states with a fixed (flat) tax rate. What this means, is that rather like federal taxes, our state taxes are calculated on our income, and as our income goes up or down, our state taxes will change with it. Unlike federal taxes, state taxes are much less confusing, though there are still some issues.

If you made income in Louisiana, for example, but lived in Texas, do you have to pay taxes? Texas is one of the states without state tax, right? Wrong. If you made money in a state that participates in state taxes, you have to pay. You may be considered a part-time or even a non-resident, but because you worked, you owe the tax. The reverse is also true. If you worked in Texas, but lived in Louisiana, you still have to pay state taxes. They may be slightly less, but you never know until you file.

Reciprocity agreements can also factor into state taxes. A reciprocal agreement is when two states agree to exempt the earned income of residents in neighboring states from state taxes. Simply, what this means is that someone in one state can work in another state while only paying taxes to the state they live in. For example, people who live in Virginia, but work in Washington D.C. would use this agreement to file exemption in D.C. and only take the Virginia taxes. This agreement works best when both states have taxes, and it’s on the employee to file a certificate and abide by the agreement.

State taxes can be confusing, but they don’t need to be. If you’re confused about what to pay, or even how to pay, iRefund can help you prepare for state taxes.

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