Live in California, Work in Vermont: Which State Taxes Your Paycheck?
Answer
Two returns, one credit. Vermont has the first claim on wages earned inside the state and withholds accordingly. California then taxes you as a resident on everything and gives credit for what Vermont already took, capped at what California would have charged on that same income.
Last verified
Two states can lawfully tax the same wages: Vermont because the work happened there, California because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the California return, through the credit for taxes paid to another state.
A California resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule S. The credit is capped at the California 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 · VermontForm IN-111 with Schedule IN-113
File the Vermont nonresident return FIRST — you need the Vermont tax figure before you can complete California.
- 2Resident return · CaliforniaSchedule S
File a California resident return reporting all income, then claim the credit for tax paid to Vermont. The credit is capped at what California would have charged on that same income, so if Vermont taxes it at a higher rate the difference is not refunded.
The two states, side by side
| California | Vermont | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | None | None |
| Convenience rule | No | No |
| Nonresident return | Form 540NR | Form IN-111 with Schedule IN-113 |
| Credit for other-state tax | Schedule S | Schedule IN-117 |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | No |
| Revenue department | California Franchise Tax Board | Vermont Department of Taxes |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Vermont and working in California 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: California → VermontHome state only
- 1099 contractor: California → VermontHome state, plus the client state if you work there
- Moved mid-year: California → VermontTwo part-year returns
Other California pairs
Questions people actually ask
I live in California and work in Vermont. Which state takes the tax out of my paycheck?
Two returns, one credit. Vermont has the first claim on wages earned inside the state and withholds accordingly. California then taxes you as a resident on everything and gives credit for what Vermont already took, capped at what California would have charged on that same income.
Which state should my employer be withholding for?
Vermont. The wages are sourced to Vermont, so Vermont withholding is correct and there is no California 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. California gives residents a credit for tax paid to Vermont on the same income, claimed on Schedule S. The credit is capped at the California tax on that income, so if Vermont taxes it more heavily the excess is not refunded by either state.
How current is this?
The California and Vermont rules on this page were last checked against California Franchise Tax Board and Vermont Department of Taxes 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.
- California Franchise Tax Board — individual income taxaccessed 2026-08-07
- Vermont Department of Taxes — individual income taxaccessed 2026-08-07