What do you file first state or federal income tax?

Answer 1

You file taxes in any state where you are a resident for tax purposes. The term "resident" has a different meaning for tax purposes than it does for other purposes such as in-state tuition or unemployment compensation. Each state has its own definition of a resident.

If you lived in several states during the year, you would file in all of them. If you have very complicated affairs, it is even possible to simultaneously be a resident of two or more states.

You also file in any state where you have what is known as "state source income." For example, if you worked in a state, owned income-producing property in a state, sold property located in a state, owned a business that operated in a state, won money in a casino operated in a state, then you need to file in that state.

Each state can tax all income earned by its residents no matter where in the world it is earned. Each state can also tax state source income from non-residents.

When two states tax the same income, generally the state of residence will allow its residents to claim a whole or partial credit for taxes paid to another state. Sometimes it is the reverse (for example California residents claim a credit on Arizona non-resident taxes for taxes paid to California). Sometimes two states have an agreement to exempt each other's residents from some taxes (for example, Ohio and Kentucky have an agreement not to tax each other's residents on wages only).

Answer 2

Many numbers on your State return are going to be based on your Federal return, so you should probably prepare your Federal return first.