How Moving During the Pandemic Could Affect Next Year’s Taxes

In the early spring of 2020, many people were forced to make tough decisions regarding their living situations because of the COVID-19 pandemic. While many of these decisions were intended to be short-lived, this has not been the case for many. As the pandemic continues to drag on much longer than most expected, questions have begun to arise surrounding the potential effects on next year’s taxes.

Who Could be Affected?

Many people decided to move at the start of the pandemic, whether it be for financial, medical, or social reasons. One of the most common reasons for moving was the shift to remote work, which left many workers in expensive areas seeking cheaper temporary housing. For example, for people working in places like Manhattan and San Francisco, housing can get very pricey, so when the opportunity arose for workers to keep their jobs and move to a cheaper city or state, they took it. 

While many states have not adjusted tax laws to accommodate these temporary moves, the following states have announced they will not impose additional taxes to people who have moved there temporarily because of the pandemic: Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island, and South Carolina. Temporary moves to all other states could result in additional taxation.  

How Can Moving Have an Effect on Your Taxes?

There is a great variation in tax laws depending on the states involved, making the situation all the more complicated for the average taxpayer to understand. Unfortunately, while many moved to save money, they may end up having to pay income taxes in two states. If you haven’t already, it’s important to keep track of your exact time working in each state. Certain states require that people working there for even a single day file for income taxes, so it’s crucial you keep track of your location. One way to avoid this double taxation is to make the move permanent rather than temporary, however, this must be legitimate – taxpayers should not try to deceive or hide from auditors in any way. Overall, it is advised that all people who have made temporary moves during the pandemic thoroughly evaluate the tax laws of each state to ensure they minimize the amount of double income taxation. 

Learn More About Moving & Taxes

Do you still have questions or doubts about how your taxes could be affected by your temporary move?  At Hall & Company, we’re here to help. Our expert Orange County team is experienced in handling all tax and audit matters. If you’d like to speak with an experienced tax specialist, contact us today.

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