5 — State Tax Withheld Updated for tax year 2025

What this line means

State income tax that was withheld from your nonemployee compensation payments. Some states require payers to withhold state income tax from 1099-NEC payments, particularly for nonresidents performing work in that state. This amount is a credit on your state tax return, not your federal return.

Does this apply to you?

• You performed work in a state that requires withholding on nonemployee compensation
• You are a nonresident who earned income in a state with mandatory 1099 withholding
• You had state income tax withheld from your payments and Box 5 shows an amount

Easy to overlook

State withholding on 1099 income is less common than federal backup withholding Most 1099-NEC recipients do not have state tax withheld. This box is relevant primarily for nonresidents working in states like California, New York, or Pennsylvania that require withholding on payments to out-of-state contractors above a threshold. ¹ [SOURCE: IRS 1099-NEC instructions — Boxes 5-7]

You need to file a nonresident state return to claim the credit If Box 5 shows withholding for a state where you do not live, you need to file a nonresident return in that state to either apply the credit against tax owed or request a refund. The withholding is not automatic — you must file to get credit for it. ² [SOURCE: General filing pattern — state withholding on nonemployee income]

Watch out for this

Ignoring state withholding and not filing the required nonresident state return. If a state withheld tax from your 1099-NEC payments, that state expects you to file a return. Not filing means you forfeit the credit and overpay state tax, plus you may owe penalties for failure to file in that state.

Related lines on your return

• Box 6 — 1099-NEC — State/payer’s state number (identifies which state withheld the tax)
• Box 7 — 1099-NEC — State income (the income subject to the state withholding)
• Box 4 — 1099-NEC — Federal income tax withheld (the federal counterpart)