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Live in North Carolina, Work in Arizona: Which State Taxes Your Paycheck?

Both states — credit offsets the double taxArizona withholds

Answer

Both states tax the same wages, and a credit undoes the overlap. Arizona withholds as your work state and you file a Arizona nonresident return; North Carolina taxes residents on all income, so you also file at home and claim the credit for tax paid to Arizona. File Arizona first.

Last verified

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

A North Carolina resident taxed by another state on the same income claims the credit for taxes paid to other states on Form D-400TC. The credit is capped at the North Carolina 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 · ArizonaForm 140NR

    File the Arizona nonresident return FIRST — you need the Arizona tax figure before you can complete North Carolina.

  2. 2Resident return · North CarolinaForm D-400TC

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

The two states, side by side

 North CarolinaArizona
Taxes wagesYes — flatYes — graduated
Reciprocity partnersNoneNone
Convenience ruleNoNo
Nonresident returnForm D-400 with Schedule PNForm 140NR
Credit for other-state taxForm D-400TCForm 309
Nonresident safe harbourNone publishedNone published
Local income taxNoNo
Revenue departmentNorth Carolina Department of RevenueArizona Department of Revenue
Last verified

The other direction

Reversing the commute does not always reverse the answer. Living in Arizona and working in North Carolina gives:Both states — credit offsets the double tax.

Arizona to North Carolina →

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 North Carolina pairs

Questions people actually ask

I live in North Carolina and work in Arizona. Which state takes the tax out of my paycheck?

Both states tax the same wages, and a credit undoes the overlap. Arizona withholds as your work state and you file a Arizona nonresident return; North Carolina taxes residents on all income, so you also file at home and claim the credit for tax paid to Arizona. File Arizona first.

Which state should my employer be withholding for?

Arizona. The wages are sourced to Arizona, so Arizona withholding is correct and there is no North Carolina 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. North Carolina gives residents a credit for tax paid to Arizona on the same income, claimed on Form D-400TC. The credit is capped at the North Carolina tax on that income, so if Arizona taxes it more heavily the excess is not refunded by either state.

How current is this?

The North Carolina and Arizona rules on this page were last checked against North Carolina Department of Revenue and Arizona 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.