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Live in Alabama, Work in Rhode Island: Which State Taxes Your Paycheck?

Both states — credit offsets the double taxRhode Island withholds

Answer

Rhode Island withholds and Alabama credits. Without an agreement between them, both states are entitled to tax income earned in Rhode Island by a Alabama resident. The mechanism that stops you paying twice is the credit on the Alabama resident return, which is why the Rhode Island return has to be completed first.

Last verified

Two states can lawfully tax the same wages: Rhode Island because the work happened there, Alabama because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the Alabama return, through the credit for taxes paid to another state.

A Alabama resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule CR. The credit is capped at the Alabama tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.

What you file

  1. 1Nonresident return · Rhode IslandForm RI-1040NR

    File the Rhode Island nonresident return FIRST — you need the Rhode Island tax figure before you can complete Alabama.

  2. 2Resident return · AlabamaSchedule CR

    File a Alabama resident return reporting all income, then claim the credit for tax paid to Rhode Island. The credit is capped at what Alabama would have charged on that same income, so if Rhode Island taxes it at a higher rate the difference is not refunded.

The two states, side by side

 AlabamaRhode Island
Taxes wagesYes — graduatedYes — graduated
Reciprocity partnersNoneNone
Convenience ruleNoNo
Nonresident returnForm 40NRForm RI-1040NR
Credit for other-state taxSchedule CRForm RI-1040NR Schedule II
Nonresident safe harbourNone publishedNone published
Local income taxYesNo
Revenue departmentAlabama Department of RevenueRhode Island Division of Taxation
Last verified

The other direction

Reversing the commute does not always reverse the answer. Living in Rhode Island and working in Alabama gives:Both states — credit offsets the double tax.

Rhode Island to Alabama →

Same two states, different situation

The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.

Other Alabama pairs

Questions people actually ask

I live in Alabama and work in Rhode Island. Which state takes the tax out of my paycheck?

Rhode Island withholds and Alabama credits. Without an agreement between them, both states are entitled to tax income earned in Rhode Island by a Alabama resident. The mechanism that stops you paying twice is the credit on the Alabama resident return, which is why the Rhode Island return has to be completed first.

Which state should my employer be withholding for?

Rhode Island. The wages are sourced to Rhode Island, so Rhode Island withholding is correct and there is no Alabama withholding to set up.

Will I end up paying tax twice on the same income?

Not twice over, but you will pay the higher of the two rates. Alabama gives residents a credit for tax paid to Rhode Island on the same income, claimed on Schedule CR. The credit is capped at the Alabama tax on that income, so if Rhode Island taxes it more heavily the excess is not refunded by either state.

How current is this?

The Alabama and Rhode Island rules on this page were last checked against Alabama Department of Revenue and Rhode Island Division of Taxation on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.

Sources

Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.