You moved states mid-year. Which one taxes your freelance income?

Federal tax does not care where you live. State tax cares a great deal, and moving mid-year creates a genuine complication that catches remote workers and freelancers constantly.

The short version: you will likely file two part-year resident returns, and you split your income by when you earned it, not by when you were paid.

Part-year residency

Move from one state to another during the year and you are typically a part-year resident of both.

Each state taxes the income you earned while you were a resident of it. You file a part-year return in each, and between them they cover the whole year.

The date you use is the date you established residency in the new state — which is usually the date you moved with the intention of staying, not the date the lease started or the moving van arrived.

Splitting freelance income

For an employee this is easy: the paycheque has a date.

For a freelancer it is less obvious, and the rule that matters is that income is generally sourced to where you were when you did the work, not where you were when the client paid.

An example. You move from Oregon to Texas on June 30. In August you receive $12,000 for a project you completed in May.

That income is Oregon income, because you performed the work while an Oregon resident. Being in Texas when the money arrived does not change it.

This trips people up in the other direction too: work performed just after the move, paid by a long-standing client in the old state, is generally income of the new state. What matters is where you were sitting when you did the work.

Keep a note of when projects were actually performed across a move year. Invoice dates alone will not tell you.

Expenses follow income

Business expenses are generally allocated to the state whose income they relate to.

Software subscriptions and other ongoing costs are usually apportioned across the year. Costs tied to a specific project follow that project’s state.

Nobody expects perfection here, but the allocation should be reasonable and consistent.

The states that do not let go

Some states are notably aggressive about continuing to tax people who have left. California, New York, New Jersey and Virginia have particular reputations.

Their position is that you remain a resident until you have genuinely abandoned domicile — and domicile is a stickier concept than where you sleep. It is your true, permanent home, and you keep it until you establish a new one and demonstrably give up the old.

If you leave a high-tax state, build the evidence:

• Change your driver’s licence and vehicle registration promptly
• Register to vote in the new state
• Move bank accounts and update the address on financial records
• Register your business address, if you have one, in the new state
• Update the address with every client
• Sell or genuinely let the old home rather than keeping it available
• Move professional licences and memberships where possible
• Track your days if you return frequently

Days matter more than people realise. Several states apply a statutory residency rule: spend more than 183 days there and maintain a permanent place to live, and you can be taxed as a full-year resident regardless of where you claim domicile.

Someone who “moves” to Florida but keeps an apartment in New York and spends 200 days a year there is, for tax purposes, still a New Yorker.

Nine states with no income tax

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming levy no personal income tax on earned income.

Moving to one does not remove your obligation to the state you left for the portion of the year you lived there. It just means the second half of the year is untaxed at state level.

Note also that no income tax does not mean no tax. Several of these states have substantially higher property or sales taxes, which for a homeowner can offset a large part of the saving.

Reciprocity does not help you

Some neighbouring states have reciprocity agreements so that residents of one working in the other are only taxed at home.

These almost always apply to wages only. Self-employment income is typically excluded, so a freelancer generally cannot rely on them.

Doing business in a state you do not live in

Separate from residency, you can create a tax obligation in a state simply by working there.

Most states tax non-residents on income earned from work physically performed within their borders. Spend three weeks on site with a client in another state and, strictly, that portion may be taxable there — with a credit against your home state to prevent double taxation.

Thresholds vary and enforcement against small freelancers is light, but the rule exists. If you regularly work on site in another state for meaningful periods, it is worth checking that state’s non-resident filing threshold.

Estimated payments across a move

Do not forget that your state estimated payments need to move too.

Keep paying the old state for the part of the year you lived there, then start paying the new one. Failing to register and pay in the new state produces a penalty there even if you overpaid the old one — the two do not net off.

If your new state has no income tax, your state estimated payments simply stop after the move date.

Get advice if the numbers are large

Multi-state returns in a move year are one of the few areas where a straightforward freelance situation genuinely justifies an accountant — particularly leaving California or New York, where the cost of getting residency wrong substantially exceeds the fee.

The federal side is unchanged

Whatever happens with states, your federal position is identical. Self-employment tax and federal income tax are the same wherever in the US you live — which is what the calculator below works out. Your state liability sits on top of it.