Live in Arizona, Work in North Carolina: Which State Taxes Your Paycheck?
Answer
You file twice: North Carolina first, then Arizona. There is no reciprocity agreement between these two states, so North Carolina taxes the income where it was earned and Arizona taxes it again as resident income — with the resident credit removing the double charge rather than an exemption form preventing it.
Last verified
Two states can lawfully tax the same wages: North Carolina because the work happened there, Arizona because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the Arizona return, through the credit for taxes paid to another state.
A Arizona resident taxed by another state on the same income claims the credit for taxes paid to other states on Form 309. The credit is capped at the Arizona tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
What you file
- 1Nonresident return · North CarolinaForm D-400 with Schedule PN
File the North Carolina nonresident return FIRST — you need the North Carolina tax figure before you can complete Arizona.
- 2Resident return · ArizonaForm 309
File a Arizona resident return reporting all income, then claim the credit for tax paid to North Carolina. The credit is capped at what Arizona would have charged on that same income, so if North Carolina taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Arizona | North Carolina | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — flat |
| Reciprocity partners | None | None |
| Convenience rule | No | No |
| Nonresident return | Form 140NR | Form D-400 with Schedule PN |
| Credit for other-state tax | Form 309 | Form D-400TC |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | No |
| Revenue department | Arizona Department of Revenue | North Carolina Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in North Carolina and working in Arizona gives:Both states — credit offsets the double tax.
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.
- Remote worker: Arizona → North CarolinaHome state only
- 1099 contractor: Arizona → North CarolinaHome state, plus the client state if you work there
- Moved mid-year: Arizona → North CarolinaTwo part-year returns
Other Arizona pairs
Questions people actually ask
I live in Arizona and work in North Carolina. Which state takes the tax out of my paycheck?
You file twice: North Carolina first, then Arizona. There is no reciprocity agreement between these two states, so North Carolina taxes the income where it was earned and Arizona taxes it again as resident income — with the resident credit removing the double charge rather than an exemption form preventing it.
Which state should my employer be withholding for?
North Carolina. The wages are sourced to North Carolina, so North Carolina withholding is correct and there is no Arizona 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. Arizona gives residents a credit for tax paid to North Carolina on the same income, claimed on Form 309. The credit is capped at the Arizona tax on that income, so if North Carolina taxes it more heavily the excess is not refunded by either state.
How current is this?
The Arizona and North Carolina rules on this page were last checked against Arizona Department of Revenue and North Carolina Department of Revenue 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.
- Arizona Department of Revenue — individual income taxaccessed 2026-08-07
- North Carolina Department of Revenue — individual income taxaccessed 2026-08-07