Why Are My Federal Wages Different from My State Wages?
💰 Federal income vs. state income — why the difference?
When filing your U.S. tax return, you might notice that the federal wages on your tax forms don’t match your state wages.
Don’t worry — this is actually quite common, especially for nonresidents working in the U.S.
Here’s everything you need to know about why this happens and what it means for your tax filing.
🧾 What You’ll Need
If you worked or earned U.S.-sourced income, you’ll likely receive one or more of these income forms:
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W-2: For wages, salaries, and employment income.
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1042-S: For scholarships, stipends, awards, or tax treaty-exempt income.
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1099: For investment, freelance, or rental income.
Even if your income isn’t reported on one of these forms, you still need to report it to the IRS.
🧮 Why Are My Federal and State Wages Different?
There are a few common reasons your federal and state wages may not match:
1️⃣ State rules differ from federal rules
Some deductions allowed at the federal level are not allowed by your state.
For example, California does not allow deductions for Health Savings Account (HSA) contributions — meaning your state wages will appear higher than your federal wages.
2️⃣ Tax treaty exemptions
If part of your income is exempt from federal tax under a tax treaty between your home country and the U.S., that amount will not appear in your federal wages (Box 1 on Form W-2).
However, most states do not recognize federal tax treaties, so your state wages will include the full income amount — making them higher than your federal wages.
3️⃣ Different taxable wage definitions
Some benefits (like retirement contributions or pre-tax deductions) may be taxed differently at the federal and state level, causing discrepancies between the two amounts.
⚠️ What to Do if You See a Wage Difference
If you see an alert such as:
“Your federal income is higher (or lower) than your state income. Please check if your details are correct.”
✅ Double-check the numbers on your W-2 or 1042-S.
✅ Confirm that the wage difference matches the explanations above.
✅ If you’re unsure, don’t panic — this is not an error, just a prompt to review your entries.
🗓️ Important Reminder
All U.S. nonresidents must file their 2024 tax return by April 15, 2025.
Even if you didn’t earn income, you may still need to file Form 8843 to stay compliant.
🧮 Need Help?
Filing taxes as a nonresident can be confusing — especially when your forms don’t match perfectly.
J1 Summer Tax Back can help you prepare a fully compliant U.S. tax return, ensuring your federal and state income are reported correctly.
✅ Save time and avoid mistakes
✅ Determine your correct residency status
✅ Claim your maximum state tax refund
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✅ 24/7 live chat support from our experts
💼 Start your nonresident tax return today with J1 Summer Tax Back — quick, secure, and stress-free!