Hello! Hope y’all are well. Recently got married. Wife used to live in a no state income tax state. Now we live in the Midwest. Have two questions:

1. She works remote, so I assume eventually she will need to pay state income taxes. Any strategies to minimize that hit?
2. We have a few rental properties that we rent out (not a lot). Some are in the no state income tax state, and some with state income tax. Any strategies there around minimizing income tax?

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If you live (or are domiciled) in a state that imposes an income tax, you are taxed on worldwide income (with very few exceptions), regardless of where income. The only way to avoid this tax is for you to move to a state that doesn't improse income taxes.

If you earn income in another state other than your resident state, you are taxed on state source income in that other state. Your home state will generally give you a credit for taxes paid to other states but there can be limitations around this credit. The credit will always be limited to no more than the tax you pay in your resident state on double-taxed income.

Not a way to lower your state income tax, but if you own property for rent and contribute the property to a pass-thriigh entity, in many states, you can make a pass-through entity tax election. This allows you to get a federal deduction on the taxes paid by the pass-throigh entity. Before doing this, make sure you consult an advisor and fully understand potential tax consequences including possible transfer taxes issues.

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Thank you!

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