- Am I Exempt From North Carolina Taxes if I Did Not Reside but Only Worked There?
- Do I Have to Pay Pennsylvania Inheritance Tax if My Relative Lives in Another State?
- Is Military Retirement Income Taxable in North Carolina?
- Do I Have to Pay Federal Taxes If They Were Not Deducted From My Paycheck in North Carolina?
- How Much State Income Tax Does North Carolina Withhold From Paychecks?
- Do I Have to File State Taxes If I Owe Nothing?
You might need to cross state lines to make a living, but if you do your tax situation is going to be a little confusing. North Carolina and South Carolina each have state income tax systems designed to claim a portion of your income; exactly where you live is going to be the key to which state income tax rate you'll be paying.
Basic Filing Requirements
If you live in North Carolina but work in another state, you still might have to pay North Carolina income tax on that out-of-state income. North Carolina has minimum income thresholds for filing: as of 2012, single filers had to make $5,500, and married filers had to earn $11,000 in gross income. The amounts are slightly higher if you are 65 years or older. If you make less than the threshold amount, you don't need to file a return unless you're claiming a state tax refund.
South Carolina Income Taxes
If you work in South Carolina, then you might be subject to South Carolina tax withholding. South Carolina also requires you to file a return if you are a nonresident who earns money within the state. If you live in South Carolina for part of the year, you still may declare yourself a full-year resident. That means you can file a South Carolina return and claim a credit of any taxes you pay to North Carolina.
While working in two states, you have the option of paying income tax to one state while declaring a tax credit on those payments to the second. If there is a difference in the tax rates, you will end up paying taxes to two states at whatever the higher rate is. In 2012, North Carolina had three tax brackets from 0 to 7.75 percent, depending on taxable income, while South Carolina had six brackets from 0 to 7 percent. The out-of-state tax credit is present in all state tax systems; otherwise, workers who move across state lines to earn money would be subject to double taxation on their income.
The exception to South Carolina taxation of nonresidents is for military personnel. Anyone from out of state who is posted to South Carolina while in the military is not subject to South Carolina state tax or tax withholding. Nonmilitary income, however, still gets hit with South Carolina tax. In addition, your state of residence might still require that you pay income taxes on military and nonmilitary income earned in South Carolina.
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