With it being tax season and all, I got to wondering how taxes would work for commuting pilots. For example, if I lived in Phoenix and commuted to Chicago as a base, would I pay Illinois or Arizona state taxes? Would this change if I had a crash pad or small apartment in another state? Do some pilots establish residency in states with no income tax to save money then just commute to their base? I know it’s probably not enough of a difference to make up for some of the inconveniences of commuting, but I was just curious how that incorporated into everything. I don’t know very much about taxes so the simpler the explanation, the better!
As always know that we’re pilots and not accountants and always recommend you get professional advice. What I can tell you is yes you’ll pay state tax based on your residence. It can’t be a matter of where you work because obviously we work everywhere. To your final point I know quite a few pilots who have moved to states with low or no state tax just for that reason. While it definitely adds to the inconvenience factor, when you start earning over $300k the tax savings can be significant.
You will pay taxes based on your state of residence, not where you are based. As pilots, we fall under Department of Transportation IRS tax rules, which covers things such as this. That being said, while I do pay Michigan taxes, I do also pay a very small amount to New Jersey as they mandate that we be part of their disability insurance program.