State Income Taxes

Most, but not all, U.S. States have an income tax.  This tax is completely separate from federal income tax.  Some states even have a local income tax, called a “piggy-back” tax. Tax laws and rates vary state to state.  In GMU’s tri-state area (Virginia, Maryland and the District of Columbia), individuals pay income taxes to the state in which they live, even if they work in one of the other two jurisdictions. 

GMU’s international visitors generally live in either Virginia, Maryland, or the District of Columbia (D.C.).  Each of these three has an income tax, but here is something for people from treaty countries to consider:  Maryland does not honor federal income tax treaties, but Virginia and D.C. do.  If you live in Maryland and are able to protect some or all of your wage or scholarship income from federal tax under the terms of a tax treaty, you will probably still have to pay tax on it to the State of Maryland.  OIPS suggests that its international visitors take this into consideration when they make their decision about where to reside during their visit.  (Other states that do not honor federal treaty benefits are Alabama, Arkansas, California, Connecticut, Hawaii, Kansas, Kentucky, Mississippi, New Jersey, North Dakota and Pennsylvania.)

States define tax residence differently than the IRS does at the federal level.  At the state level, there are generally three types of people:  residents, part-year residents and nonresidents.  The determination of residence tends to be based on the time of year an individual moved into or out of a state, or if they lived there all year.  As a result, it is entirely possible for an international visitor to be considered a resident for tax purposes at the state level several years before they are considered a resident for federal tax purposes.

States also define the minimum requirements for whether or not an individual must file a state income tax return, without regard to the individual’s federal tax status of resident alien or nonresident alien.  This should be kept in mind at tax return filing time.  Also, individuals who have lived in (and received income from) more than one state during the tax year may very well be required to file a tax return of some sort with each state in which they lived during the year.  States tend to follow federal rules in terms of whether or not an individual can claim children as dependents, claim the standard deduction, etc.  Links to each state's tax website can be found at www.taxadmin.org/fta/link/link.html

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