In what cases can states tax non-residents?
From the Massachusetts Department of Revenue:   1st - Massachusetts Source Income That is Excluded   Massachusetts gross income excludes certain items of income derived from sources within Massachusetts: non-business related interest, dividends and gains from the sale or exchange of intangibles, and qualified pension income. 2nd - Massachusetts Source Income That is Included:   Massachusetts gross income includes items of income derived from sources within Massachusetts. This includes income: 3rd - Trade or business, Including Employment Carried on in Massachusetts:   A nonresident has a trade or business, including any employment carried on in Massachusetts if: A nonresident generally is not engaged in a trade or business, including any employment carried on in Massachusetts if the nonresident's presence for business in Massachusetts is casual, isolated and inconsequential. A nonresident's presence for business in Massachusetts will ordinarily be considered casual, isolated and inconsequential if it meets the requirements of the Ancillary Activity Test (AAT) and Examples. When nonresidents earn or derive income from sources both within Massachusetts and elsewhere, and no exact determination can be made of the amount of Massachusetts source income, an apportionment of income must be made to determine that amount considered Massachusetts gross income. 4th - Apportionment of Income:   Apportionment Methods:   The three most common apportionment methods used to determine Massachusetts source income are as follows:   Gross income is multiplied by a:   So if you go to Massachusetts to work, you have to pay the tax.  If you collect a share of the profit or revenue from Massachusetts, you have to pay tax on that.  If you work from Oregon and are paid for that work, then you don't pay Massachusetts tax on that.  If anything, your company might have to pay Oregon taxes on revenue you generate (you are their agent or employee in Oregon).   Does the answer change depending on whether the income is reported at 1099 or W-2? This shouldn't matter legally.  It's possible that it would be easier to see that the work was done in Oregon in one or the other.  I.e. it doesn't make any legal difference but may make a practical difference.   All this assumes that you are purely an employee or contractor and not an owner.  If you are an owner, you have to pay taxes on any income from your Massachusetts business.  Note that this applies to things like copyrights and real estate as well as the business.   This also assumes that you are doing your work in Oregon.  If you live in Oregon and travel to Massachusetts to work, you pay taxes on your Massachusetts income in Massachusetts.
No state taxes, but Italy also has a favorable treaty with the US Federal Government. Look into to lowering your federal taxes to 5% ;) its a thick read, http://www.irs.gov/businesses/international/article/0,,id=169601,00.html and also try to determine if the Foreign Earned Income Exclusion applies to you, reducing your Federal tax to ZERO on the first $95,100 earned abroad. http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html but then you may be subject to a 20%+ italy tax. so maybe you should just try for the tax treaty This question came up again (Living in Florida working remotely - NY employer withholds NYS taxes - Correct or Incorrect?) and the poster on the new version didn't find the existing answers to be adequate, so I'm adding a new answer.   NYS will tax this income if the arrangement is for the convenience of the employee. If the arrangement is necessary to complete the work, then you should have no NYS tax. New York state taxes all New York-source salary and wage income of nonresident employees when the arrangement is for convenience rather than by necessity (Laws of New York, § 601(e), 20 NYCRR 132.18). Source: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html Similar text can also be found here: http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/ The NYS tax document governing this situation seems to be TSB-M-06(5)I. I looked at this page from NYS that was mentioned in the answer by @littleadv. That language does at first glance seem to lead to a different answer, but the ruling in the tax memo seems to say that if you're out of state only for your convenience then the services were performed in NYS for NYS tax purpose. From the memo: However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of- state duties in the service of his employer. "ECI is relevant to non-resident aliens who are engaged in trade or business in the US. For that, you have to be present in the US, to begin with, or to own a business or property in the US. So the people to whom it is relevant are non-resident aliens in the US or business/property owners, not foreign contractors.  From the IRS: The following categories of income are usually considered to be   connected with a trade or business in the United States. You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a   nonimmigrant on an ""F,"" ""J,"" ""M,"" or ""Q"" visa. The taxable part of any   U.S. source scholarship or fellowship grant received by a nonimmigrant   in ""F,"" ""J,"" ""M,"" or ""Q"" status is treated as effectively connected   with a trade or business in the United States. If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you   are considered to be engaged in a trade or business in the United   States. You usually are engaged in a U.S. trade or business when you perform personal services in the United States. If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions,   engaged in a trade or business in the United States. For example,   profit from the sale in the United States of inventory property   purchased either in this country or in a foreign country is   effectively connected trade or business income. Gains and losses from the sale or exchange of U.S. real property interests (whether or not they are capital assets) are taxed as if you   are engaged in a trade or business in the United States. You must   treat the gain or loss as effectively connected with that trade or   business. Income from the rental of real property may be treated as ECI if the taxpayer elects to do so." Prachi - While most non-resident aliens are not allowed to claim the standard deduction here are some exceptions: IRS Law under Article 21: ARTICLE 21 Payments Received by Students and Apprentices This falls under the U.S.A.-India Tax Treaty. Sources: I hope this helps. So, yes, I do believe you would be able to claim the standard deduction, although it's always good to check with a tax adviser. You do not need to report gifts from US residents (US citizens/green card holders/tax residents due to length of stay) since filing gift tax return is their responsibility. In case of foreigners you need to report gifts in excess of $100K. In any case, transfers between spouses are exempt from gift tax. No, if you are a nonresident alien, you cannot deduct sales tax. You can only deduct state income tax. 1040NR Schedule A (which is page 3 of 1040NR) does not contain an option for sales tax, like 1040 Schedule A does. If you are a resident alien, then you can deduct sales tax. Completely different. Canadians can be deemed non-residents by severing their residential ties with Canada and emigrating to another country, and no longer required to file unless they have certain sources of Canadian income. *See* http://travel.gc.ca/travelling/living-abroad/taxation   No such classifications exist with US citizenship. You file a return no matter what, even if you haven't stepped foot in the US in decades. "Depends. If you can choose where to relocate to, then I second the ""no income tax"" states. But even of these chose wisely, some have no income taxes at all, others have taxes on some kinds of income. Some don't have neither individual nor corporate taxes, some tax businesses in some ways. Some compensate with higher property taxes, others compensate with higher sales taxes. On the other hand, you might prefer states with income taxes but no sales taxes. It can happen if your current income is going to be low, but you'll be spending your savings. If you don't have a choice (for example, your employer wants you to move closer to their office), then you're more limited. Still, you can use the tax break on moving expenses (read the fine print, there are certain employment requirements), and play with the state taxes (if you're moving to a state with less/no taxes - move earlier, if its the other way - move later). Check out for cities that have income taxes. In some states it cannot happen by law (for example, in California only the state is allowed to collect income taxes), in others it is very common (Ohio comes to mind). Many things to consider in New York. New York City has its own income tax (as well as Yonkers, as far as I remember these are the only ones in the State of New York). So if you want to save on taxes in NYS but live close to the city, consider White Plains etc. If you work in NYC its moot, you're going to pay city taxes anyway. That is also true if you live in NJ but work in the city, so tax-wise it may be more efficient not to live across state lines from your place of work." There's virtually no way for a person to completely avoid taxation at some point in their lives. Between payroll, sales, excise, and the like, you've been taxed at some point. And whether or not the individual paid is irrelevant to the ownership claim being invalid. "This is an answer grounded in reality, not advice. Most states have no means of enforcing their foreign business entity registration statutes. Some states never even codified consequences. (California is a notable exception.). Some states have 'business licenses' that you need in order to defend your entity in court, but will retroactively apply the corporate veil when you get the license. The ""do I have to register"" question is analogous to asking a barber if you need a haircut. But this doesn't absolve you of looking in the mirror (doing your research). Registration and INCOME taxes are different stories. If a state calls their fee a franchise tax and it is applicable and there are real consequences for not, then you will have to pay that tax. Anyway, this isn't advocating breaking the law, but since it describes ignoring toothless state-chartered agencies, then there are people that will disagree with this post, despite being in line with business climate in the United States. Hope that helps" Both states will want to tax you. Your tax home is where you maintain a domicile, are registered to vote, etc. and you will probably want to keep this as MA since you state that MA is your permanent residence and you are staying in a rented place in PA. But be careful about voter registration; that is one of the items that can be used to determine your state of residence.  OK, so if you and your spouse are MA residents,  you should file jointly as residents in MA and as nonresidents in PA. Do the calculations on the nonresident return first, and then the calculations on the resident  return. Typically, on a nonresident tax return, the calculations are effectively the following: Report all your income (usually AGI from the Federal return).  Call this $X. Compute the PA state tax due on $X.  Note that you follow the rules for nonresidents in doing this, not the calculations used by PA residents. Call the amount of tax you computed as $Y. What part of the total income $X is attributable to PA sources? If this amount is $Z, then you owe PA $Y times (Z/X). On the resident return in MA, you will likely get some credit for the taxes paid to PA, and this will reduce your MA tax burden. Usually the maximum credit is limited to the lesser of actual tax paid to PA and what you would have had to pay MA for the same income. As far as withholding is concerned, your employer in PA will withhold PA taxes as if you are a PA resident, but you can adjust the amount via the PA equivalent of IRS Form W4 so as to account for any additional  tax that might be due because you will be filing as a nonresident.  Else you can pay estimated taxes via the PA equivalent of IRS Form 1040ES. Similarly, your wife can adjust her withholding to account for the MA taxes that you will owe on the joint income, or you can pay estimated taxes to MA too. Note that it is unlikely that your employer in Pennsylvania will withhold  Massachusetts taxes (and send them to Massachusetts) for you, e.g. if it is a ma-and-pa store, but there may be special deals available if  your employer does business in both states, i.e. is a MA-and-PA store. Yes. Here's the answer to this question from oregon.gov: 3. I am moving into Oregon. What income will be taxed by Oregon? As an Oregon resident, you are taxed on ALL income regardless of the   source of the income. This includes, but is not limited to: You may need to pay estimated taxes if you don't have Oregon   withholding on your income. Multistate Impact of the American Taxpayer Relief Act of 2012  In general, states with rolling conformity will follow this change. States with specific date conformity will continue  to follow the date of conformity currently in effect and will not follow the change. A few states may have their own  QSBS rules and will not conform to or be impacted by this provision of the Act. The chart that follows summarizes  these principles as applied to the enumerated states:  STATE: QSBS Exclusion Conformity:  California statutes refer to the IRC QSBS provisions but modify and limit their  applicability, and would not be impacted by this provision of the Act. However, California’s provisions were ruled unconstitutional in recent litigation and the California Franchise Tax Board has recently taken the position that gain exclusions  and deferrals will be denied for all open tax years. Florida Florida does not impose an income tax on individuals and therefore this provision of  the Act is inapplicable and will have no impact.  Illinois Due to its rolling conformity, Illinois follows this provision of the Act.  Because New York effectively provides for rolling conformity to the IRC, through  reference to federal adjusted gross income as the state starting point, New York  effectively follows this provision of the Act.  Texas does not impose an income tax on individuals I agree that double taxation makes no sense regardless of individual or corporation.  Having said that, it's my understanding that Murca offers corporations tax credits on foreign taxes paid to avoid double taxation.  I'm pretty sure that a similar vehicle exists for individuals as well.  My issue is entirely with corporations paying off legislators to avoid taxes that they have an obligation to pay in the country that they operate. non-resident aliens to the US do not pay capital gains on US products. You pay tax in your home country if you have done a taxable event in your country. http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp#axzz1mQDut9Ru but if you hold dividends, you are subject to US dividend tax. The UK-US treaty should touch on that though.