Currently I'm working on a temporary 6 month contract in Washington but my permanent residence is in Iowa and if it matters I am getting per diem. Does Iowa or Washington State Income Tax get withheld from my paychecks? Currently Iowa state income tax is being withheld. We live right on the Oregon/Washington border so my husband is here working as well on the Oregon side and he's getting Oregon state income tax withheld. Which state income tax should be withheld from my husband's and my pay check?
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Washington does not have an individual income tax, so you will never see Washington income tax withheld. Oregon does. As far as what gets withheld that depends on where the company is located and how sharp their HR department is. They often screw up temporary positions and multiple state workers. If your husband works for an Oregon company in Oregon he probably will only have Oregon tax withheld. Most of the time employers will only withhold the local income tax where you are working unless they have reason to know other withholding is required. When it comes to filing the tax returns, you are going to file a resident Iowa tax return and a non-resident Oregon tax return. Income earned in Oregon will be taxed to Oregon. All income earned everywhere will be taxed to Iowa. You will have a credit on the Iowa return for taxes paid to Oregon. So it makes sense to have Oregon tax withheld on your husband's paycheck and Iowa tax withheld on yours.
