Yes, FreeTaxUSA can file multiple state tax returns. The software walks you through each state return one at a time after you finish your federal return, and it supports filing in all states that collect income tax. Each state return costs $15.99 to file — federal is free.
Multi-state filing is more common than most people think. According to U.S. Census Bureau data, roughly 4.5 million Americans work outside their state of residence. Remote work has made this even more complex, with 27.6 million people working from home as of 2021 — triple the number from 2019. Filing in more than one state without understanding the rules can lead to double taxation, missed credits, or penalties from state tax agencies.
Here is what you will learn:
- 🧾 How FreeTaxUSA’s multi-state filing process works step by step — and what it costs per return
- 💰 Which states have reciprocity agreements that could save you from filing a second return altogether
- ⚖️ How the credit for taxes paid to another state protects you from paying tax on the same income twice
- 🚫 The most common multi-state filing mistakes — and the specific consequences of each one
- 📊 How FreeTaxUSA stacks up against TurboTax and TaxAct when you need to file in more than one state
How FreeTaxUSA Walks You Through Multiple State Returns
FreeTaxUSA uses a sequential approach to multi-state filing. You complete your federal return first, then the software moves you into the State section. It starts with the state listed in your personal information — the one tied to your home address. The program assumes this is your resident state, but you can change it if needed.
Once you finish the first state return, FreeTaxUSA asks if you need to prepare additional state returns. If you had income reported on a W-2 from another state, the software may flag this for you. You click “Add a State Return,” select the next state, and answer the new set of questions for that state.
Each state return is its own section with its own screens. You allocate income to each state, report withholdings, and claim credits where they apply. FreeTaxUSA repeats this process for every state you need to add — there is no limit on how many states you can file.
The Order You File Your States Matters
FreeTaxUSA requires you to complete your resident state return first before any nonresident or part-year resident returns. This matters because your resident state often gives you a credit for taxes paid to other states. If you fill out the nonresident return first, the credit calculation on your resident return could be wrong.
The software handles this by locking you into the resident state first. If you try to skip ahead, the program will redirect you. This built-in structure helps prevent errors that could lead to overpaying or underpaying taxes.
Resident vs. Nonresident vs. Part-Year Resident Returns
Each state return you file will fall into one of three categories. Understanding these categories is critical because each one determines how much of your income gets taxed by that state.
| Filing Status | What It Means |
|---|---|
| Resident Return | You lived in this state for the full year and owe tax on all your income, no matter where you earned it |
| Nonresident Return | You did not live in this state but earned income there — you owe tax only on income sourced to that state |
| Part-Year Resident Return | You lived in this state for part of the year and another state for the rest — you owe tax on income earned while you were a resident |
FreeTaxUSA asks you specific questions to determine which type of return to prepare for each state. Getting this wrong can result in paying tax on income that should not be taxed by that state.
What It Costs to File Multiple States on FreeTaxUSA
FreeTaxUSA charges $15.99 per state return. This is a flat fee that applies whether you file a resident, nonresident, or part-year resident return. If you file in three states, your total state filing cost is $47.97. Your federal return remains free regardless of how many state returns you add.
This per-state fee covers e-filing for the state return. FreeTaxUSA’s Deluxe upgrade costs $7.99 and adds live chat support plus unlimited amended returns. The Pro Support upgrade costs $44.99 and includes phone support and access to a tax expert for personal advice.
How FreeTaxUSA’s Multi-State Costs Compare to Competitors
The price difference becomes significant when you file in multiple states. A person filing federal plus two state returns on FreeTaxUSA pays $31.98 total. The same person on TurboTax could pay over $130 depending on the tier they need.
| Feature | Cost |
|---|---|
| FreeTaxUSA federal return | Free |
| FreeTaxUSA per state return | $15.99 |
| TurboTax federal return (Do It Yourself) | $0–$99 |
| TurboTax per state return | $0–$49 |
| TaxAct federal return | $0–$64.99 |
| TaxAct per state return | $39.99–$44.99 |
TurboTax provides more built-in guidance and a maximum refund guarantee backed by a promise to refund your service fee if another preparer gets you a bigger refund. TaxAct falls in the middle on price. FreeTaxUSA offers the lowest cost for people who are comfortable with less hand-holding.
State Reciprocity Agreements That Could Eliminate a Second Return
A reciprocity agreement is a deal between two or more states that says: if you live in State A but work in State B, you only pay income tax to State A. This means you may not need to file a nonresident return in the state where you work. There are currently reciprocal agreements across 16 states and the District of Columbia.
These agreements exist because millions of Americans cross state lines to get to work every day. Without reciprocity, those workers would owe tax to two states on the same paycheck. Reciprocity prevents this by letting the worker file an exemption form with their employer so the work state does not withhold state taxes.
Which States Have Reciprocity Agreements
Not every state participates in reciprocity. The states that do have specific partner states listed in their agreements. Here are the key ones:
| State | Has Reciprocity With |
|---|---|
| Arizona | California, Indiana, Oregon, Virginia |
| Illinois | Iowa, Kentucky, Michigan, Wisconsin |
| Indiana | Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin |
| Kentucky | Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, Wisconsin |
| Maryland | D.C., Pennsylvania, Virginia, West Virginia |
| Michigan | Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin |
| Minnesota | Michigan, North Dakota |
| Montana | North Dakota |
| New Jersey | Pennsylvania |
| North Dakota | Minnesota, Montana |
| Ohio | Indiana, Kentucky, Michigan, Pennsylvania, West Virginia |
| Pennsylvania | Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia |
| Virginia | D.C., Kentucky, Maryland, Pennsylvania, West Virginia |
| West Virginia | Kentucky, Maryland, Ohio, Pennsylvania, Virginia |
| Wisconsin | Illinois, Indiana, Kentucky, Michigan |
| District of Columbia | All U.S. states |
Washington D.C. has the broadest agreement — it extends reciprocity to every U.S. state. This exists because so many federal government workers live outside D.C. but commute there for work. To qualify, you must be a resident of another state and spend fewer than 183 days per year in D.C.
Bilateral vs. Unilateral Agreements
Not all reciprocity agreements work the same way. There are two types, and the difference matters for your filing.
Bilateral agreements are two-way deals between specific states. Both states agree to exempt the other state’s residents from income tax. Seventeen of the 30 existing reciprocal agreements are bilateral agreements. Some of these are conditional — for example, Kentucky’s agreement with Virginia only applies if you commute daily to Kentucky from Virginia.
Unilateral agreements are one-way offers. Three states — Wisconsin, Minnesota, and Indiana — automatically extend reciprocity to any state that gives the same treatment to their residents. This means if your home state exempts Indiana residents from tax, Indiana will exempt you too, even without a formal two-way agreement.
What If Your States Don’t Have a Reciprocity Agreement
If no reciprocity agreement exists between your home state and your work state, you must file tax returns in both states. Your employer withholds taxes based on the laws of the state where you work. You then file a nonresident return in the work state and claim a credit for taxes paid to another state on your resident state return.
This credit exists to prevent double taxation. Your resident state gives you a dollar-for-dollar credit (up to a limit) for the income taxes you paid to the other state. FreeTaxUSA has a built-in section that calculates this credit for you.
The 3 Most Common Multi-State Filing Scenarios
Scenario 1: You Moved Mid-Year to a New State
Meet Sarah. She lived in Ohio for the first seven months of the year, then moved to North Carolina in August for a new job. She earned $35,000 in Ohio and $25,000 in North Carolina.
Sarah needs to file a part-year resident return in both Ohio and North Carolina. Each state taxes only the income she earned while living there. FreeTaxUSA asks her when she moved and splits her income between the two states.
| What Sarah Does | What Happens |
|---|---|
| Files a part-year return in Ohio for January–July income | Ohio taxes $35,000 earned while she was a resident |
| Files a part-year return in North Carolina for August–December income | North Carolina taxes $25,000 earned while she was a resident |
| Reports full income on her federal return | The IRS taxes all $60,000 regardless of which state she lived in |
| Claims the correct deductions in each state | Each state applies its own standard deduction rules to her portion of income |
The key risk for Sarah is forgetting to file in one of the two states. If she only files in North Carolina, Ohio’s Department of Taxation will eventually send her a notice — plus penalties and interest on the unpaid tax.
Scenario 2: You Live in One State but Work in Another
Meet James. He lives in New Jersey but commutes to New York City for work. He earns $90,000 per year, all from his New York employer. New Jersey and New York do not have a reciprocity agreement.
James must file a nonresident return in New York and a resident return in New Jersey. New York taxes his $90,000 because he earned it there. New Jersey also wants to tax his $90,000 because he lives there. To avoid double taxation, New Jersey gives him a credit for taxes paid to New York.
| What James Does | What Happens |
|---|---|
| Files a nonresident return in New York | New York taxes his full $90,000 of work income sourced to the state |
| Files a resident return in New Jersey | New Jersey calculates tax on his full $90,000 as a resident |
| Claims a credit on his NJ return for taxes paid to NY | New Jersey reduces his NJ tax bill by the amount he paid to New York |
| Pays the difference if NJ tax rate is higher | James owes NJ only the gap between the two states’ tax amounts |
The biggest mistake James could make is skipping the New York nonresident return and only filing in New Jersey. New York has one of the most aggressive tax enforcement agencies in the country. They will catch the missing return through W-2 matching.
Scenario 3: You Earn Rental Income in a Different State
Meet Diana. She lives in Texas (no state income tax) but owns a rental property in Colorado that brings in $18,000 per year in net rental income.
Diana does not need to file a state return in Texas because Texas has no income tax. She does need to file a nonresident return in Colorado because she earned income sourced to that state. Colorado will tax her $18,000 in rental income at its flat rate.
| What Diana Does | What Happens |
|---|---|
| Skips a Texas state return | Texas has no income tax, so no filing is needed |
| Files a nonresident return in Colorado | Colorado taxes her $18,000 in rental income |
| Reports the rental income on her federal return | The IRS taxes all of Diana’s income regardless of state |
| Claims allowable deductions on the Colorado return | Diana can deduct property expenses, depreciation, and repairs against her CO income |
Diana’s situation is straightforward because her home state has no income tax. If she lived in a state with income tax, she would also need to claim a credit on her home state return for the taxes she paid Colorado.
How the Credit for Taxes Paid to Another State Works
The credit for taxes paid to another state is the main tool that prevents double taxation. Almost every state with an income tax offers this credit. It works by reducing the tax you owe to your resident state by the amount you already paid to a nonresident state on the same income.
Here is the formula most states use: the credit equals the lesser of (a) the tax you paid to the other state on the shared income, or (b) the tax your resident state charges on that same income. This means if the other state’s tax rate is higher than your home state’s rate, you get a full credit and owe nothing extra at home. If the other state’s rate is lower, you pay the difference to your home state.
FreeTaxUSA calculates this credit automatically when you complete both state returns. The software pulls the tax amount from your nonresident return and applies it to your resident return. You do not have to enter the numbers manually, but you should double-check the amounts to make sure they match.
When the Credit Does Not Fully Protect You
The credit has limits. Your resident state will never give you a credit that is larger than the tax it would have charged on the same income. Some states also restrict which types of income qualify for the credit. The double-tax whipsaw problem occurs when two states both claim the right to tax the same income, but neither gives a full credit for the other’s tax. This is rare, but it does happen with certain income types like partnership distributions.
Investment income can also create issues. Some states tax investment income based on where you live, while others tax it based on where the business is located. If two states both claim the same investment income, the credit may not cover the full amount. This is one area where a tax professional can save you real money.
Nine States With No Income Tax — You Might Not Need to File
Nine states do not collect a state income tax. If you live or earn income in one of these states, you do not need to file a state return there:
- Alaska
- Florida
- Nevada
- New Hampshire (taxes only interest and dividends, and this is being phased out)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
FreeTaxUSA confirms these states do not require a state return. If you live in Florida and work remotely for a company in Florida, you pay zero state income tax and do not need to file any state return. This saves you the $15.99 fee per state on FreeTaxUSA.
The catch is when you live in a no-income-tax state but earn income in a state with income tax. In that case, you still need to file a nonresident return in the state where you earned the income. Living in Texas does not protect you from owing Colorado tax on your Colorado rental income, for example.
How FreeTaxUSA Handles Income Allocation Between States
When you file in multiple states, you need to allocate your income — meaning you tell each state how much of your total income was earned there. FreeTaxUSA asks you specific questions to figure this out.
For W-2 income, the allocation is straightforward. Your W-2 shows the state and the amount of wages earned in that state in boxes 15–17. FreeTaxUSA pulls these numbers directly from your W-2 entry. If your employer withheld taxes for two states, the software uses those amounts to split your wages.
For self-employment income, allocation gets trickier. FreeTaxUSA asks where you performed the work. If you are a freelancer who lives in Georgia but did a project in Tennessee, the Tennessee income is not taxable at the state level because Tennessee has no income tax. But if that project was in California, you owe California tax on that income.
Rental income is allocated to the state where the property sits. Investment income like dividends and capital gains is usually taxed by your resident state. FreeTaxUSA’s allocation screens walk you through each income type and ask where it was earned or sourced.
Mistakes to Avoid When Filing Multiple State Returns
Mistake 1: Filing Only in Your Home State
Some people assume they only owe tax where they live. This is wrong. If you earned income in another state, that state has the right to tax it. Failing to file a nonresident return can trigger a notice from the other state’s tax agency, plus penalties of 5% per month (up to 25%) on the unpaid tax and interest charges.
Mistake 2: Forgetting to Claim the Credit for Taxes Paid to Another State
If you file in two states but forget to claim the credit on your resident return, you double-pay on the same income. FreeTaxUSA prompts you to claim this credit, but some filers skip past the screen without entering the information. Always complete the credit section on your resident state return.
Mistake 3: Using the Wrong Filing Status for a State
Choosing “resident” when you should choose “nonresident” — or vice versa — changes how much income that state taxes. A resident return taxes all your income. A nonresident return taxes only income sourced to that state. Picking the wrong one means you either overpay or underpay, and both create problems.
Mistake 4: Not Checking for Reciprocity Agreements
If your home state and work state have a reciprocity agreement, you may not need to file a nonresident return at all. Filing an unnecessary return wastes $15.99 on FreeTaxUSA and complicates your tax situation. Check the reciprocity agreement list before you start.
Mistake 5: Ignoring State-Specific Rules for Remote Workers
Some states have a “convenience of the employer” rule. New York is the most well-known example. If your employer is in New York but you work remotely from New Jersey, New York may still tax your income unless you can prove you work from home because your employer requires it — not because it is convenient for you. FreeTaxUSA does not automatically flag this rule, so you need to know about it yourself.
Do’s and Don’ts of Multi-State Filing on FreeTaxUSA
| Do | Don’t |
|---|---|
| Do complete your federal return before starting any state returns — FreeTaxUSA uses federal data to populate state forms | Don’t start a state return before finishing your federal return, or your state numbers will be incomplete |
| Do file your resident state return first so the credit for taxes paid to other states calculates correctly | Don’t file a nonresident return first, as this can throw off credit calculations |
| Do double-check W-2 boxes 15–17 for correct state wages and withholding amounts | Don’t assume your employer entered the right state or amount — errors here are common |
| Do check if your states have a reciprocity agreement before filing a nonresident return | Don’t file an unnecessary nonresident return that wastes time and money |
| Do verify whether your state has income tax before paying $15.99 to file | Don’t pay to file a return in a state with no income tax — you do not need one |
| Do review each state’s allocation screens to make sure income is split correctly | Don’t let FreeTaxUSA auto-fill allocation amounts without checking them yourself |
Pros and Cons of Using FreeTaxUSA for Multiple State Returns
| Pros | Cons |
|---|---|
| Federal filing is free no matter how many states you add | Each state return costs $15.99, which adds up with three or more states |
| The step-by-step process guides you through each state return in order | Less built-in guidance than TurboTax — you need to understand basic state tax concepts |
| Supports all states that collect income tax | Does not automatically detect “convenience of the employer” rules |
| Automatically calculates the credit for taxes paid to another state | Customer support is limited to email on the Basic plan |
| Handles resident, nonresident, and part-year resident returns | The interface is basic and not as polished as premium competitors |
| W-2 data flows into state returns so you do not re-enter information | Cannot link two state returns together for complex credit scenarios without manual adjustments |
| Deluxe upgrade is only $7.99 for live chat and unlimited amended returns | No maximum refund guarantee like TurboTax offers |
Who Should Use FreeTaxUSA for Multi-State Filing
FreeTaxUSA is the best fit for filers who understand their multi-state situation and want to save money. If you know you are a resident of one state and a nonresident of another, and you are comfortable answering the allocation questions, FreeTaxUSA gives you everything you need at a fraction of the cost.
Filers with simple multi-state situations — like moving from one state to another, or commuting across state lines for work — will find FreeTaxUSA handles the process well. The software covers the most common scenarios without issues.
Filers with complex multi-state situations — like earning income in four or more states, dealing with the convenience-of-the-employer rule, or handling partnership K-1 income from multiple states — may benefit from TurboTax’s more robust guidance or a professional tax preparer. FreeTaxUSA can still handle the forms, but it provides less explanation of the nuances.
Military Members and Multi-State Filing
Active-duty military members often face multi-state situations because they are stationed in one state but maintain legal residency in another. Under the Servicemembers Civil Relief Act (SCRA), military members only pay state income tax to their state of legal residence, not the state where they are stationed. FreeTaxUSA supports this — you file a resident return in your home of record state and do not file in the state where you are stationed.
Military spouses also get protection under the Military Spouses Residency Relief Act (MSRRA). If a military spouse moves to a new state because of their service member’s orders, the spouse can keep their original state of residence for tax purposes. FreeTaxUSA asks about military status during the filing process to apply these rules.
Step-by-Step: How to Add a Second State Return on FreeTaxUSA
Here is the exact process you follow inside FreeTaxUSA to add additional state returns:
- Complete your entire federal return with all income, deductions, and credits entered
- Click “Continue to State” — FreeTaxUSA opens your resident state based on the address in your Personal Information section
- Confirm or change your state of residence when the program asks
- Answer all questions for your resident state return, including income allocation and credits
- After finishing, FreeTaxUSA asks: “Do you need to prepare any additional state tax returns?”
- Select “Yes” and click “Add a State Return”
- Choose the next state from the dropdown list
- Select whether you are filing as a nonresident or part-year resident for that state
- Answer the state-specific questions, allocate income, and enter withholding amounts
- Repeat steps 5–9 for every additional state you need
Each state return is saved separately. You can go back and edit any state return before you submit. FreeTaxUSA lets you review all your state returns on a summary screen before you pay and e-file.
What Happens If FreeTaxUSA Cannot E-File Your State Return
FreeTaxUSA supports e-filing for most states, but not all states accept electronic filing for every situation. Some states require paper filing for certain types of nonresident returns or part-year returns. If your state return cannot be e-filed through FreeTaxUSA, the software will tell you and provide instructions for printing and mailing the return.
When you mail a state return, processing takes longer — often 8 to 12 weeks compared to 1 to 3 weeks for e-filed returns. Any refund you are owed will also take longer to arrive. FreeTaxUSA still prepares the return for you even if it cannot e-file it, so you get the same forms and calculations either way.
States That May Require Special Handling
A few states have unique rules that FreeTaxUSA handles but that you should be aware of:
- New York applies the convenience-of-the-employer rule, which can tax remote workers even if they never set foot in the state
- California taxes nonresidents on all California-source income, including gains from selling California real estate
- New Jersey only has a reciprocity agreement with Pennsylvania — commuters from New York still must file in both states
- Illinois uses a flat income tax rate (4.95%), which simplifies allocation but means no progressive bracket benefit for lower-income filers
FAQs
Can FreeTaxUSA file in more than two states?
Yes. FreeTaxUSA lets you add as many state returns as you need. Each additional state costs $15.99 to file.
Does FreeTaxUSA support part-year resident returns?
Yes. The software asks when you moved and allocates income between states based on your residency dates during the tax year.
Is the federal return still free if I file multiple states?
Yes. FreeTaxUSA never charges for federal filing, regardless of how many state returns you add to your account.
Can I file a nonresident return on FreeTaxUSA?
Yes. FreeTaxUSA supports nonresident returns for all states with income tax and walks you through income allocation for each one.
Does FreeTaxUSA handle the credit for taxes paid to another state?
Yes. The software calculates this credit on your resident state return using the tax amount from your nonresident return.
Do I need to file in a state with no income tax?
No. States like Texas, Florida, and Wyoming do not require a state income tax return. You save $15.99 per state by not filing.
Can military members use FreeTaxUSA for multi-state filing?
Yes. FreeTaxUSA supports SCRA and MSRRA rules, allowing military members and spouses to file in their state of legal residence only.
Does FreeTaxUSA check for reciprocity agreements?
No. You must check whether your states have a reciprocity agreement yourself before deciding to file a nonresident return.
Is FreeTaxUSA cheaper than TurboTax for multiple states?
Yes. FreeTaxUSA charges $15.99 per state versus TurboTax’s $39–$49 per state, saving you $23–$33 on every additional state return.
Can I amend a multi-state return on FreeTaxUSA?
Yes. Deluxe users get unlimited amended returns for free. Basic users pay $17.97 for the amended return add-on.
Does FreeTaxUSA support e-filing for all states?
No. Most states accept e-filing, but some require paper filing for certain nonresident or part-year situations. The software notifies you.
Will FreeTaxUSA split my W-2 income between states?
Yes. The software reads boxes 15–17 on your W-2 and uses those amounts to allocate wages between states on your returns.
Related reading
- Does QBI Deduction Apply to State Taxes? + FAQs
- Can FreeTaxUSA Do Quarterly Taxes? (w/Examples) + FAQs
- Do I Need to File Taxes in Multiple States? (w/Examples) + FAQs
- Can You Be a Resident of Multiple States at Once? (w/Examples) + FAQs
- Which TurboTax Can File Multiple States? (w/Examples) + FAQs
- Why Are There Two States on My W-2? (w/Examples) + FAQs
- Should I Have TurboTax Do My Taxes? (w/Examples) + FAQs