1099-NEC Box 5 — State tax withheld
State income tax the payer withheld from your nonemployee compensation — rare for residents, more common for nonresident performers, athletes, and contractors working in the payer's state.
At a glance — Box 5
- Box name
- State tax withheld
- Reports to
- State return only — on your state 1040 equivalent as a withholding credit; appears on federal Schedule A (Line 5a) only if you itemize and elect to deduct state income tax.
- Check against
- Sum of state withholding lines on each payment advice. If multiple states withheld from the same payer, you may receive separate 1099-NECs or one with multiple Box 5/6/7 entries stacked.
What Box 5 means
Box 5 reports state income tax the payer withheld. State withholding on nonemployee compensation is far less common than on W-2 wages — most states do not require it for 1099-NEC recipients unless backup withholding federally is also in effect, or the recipient is a nonresident performer (entertainers, athletes), or the recipient specifically requested it.
Some states have their own backup-withholding analogs. California's 7% nonresident-contractor withholding (FTB Form 592/592-B) applies when a nonresident performs services in CA and annual payments exceed $1,500. North Carolina withholds 4% on nonresident contractors. Georgia withholds 4% on nonresident construction services. These state-specific rules are what typically populate Box 5.
Box 5 amounts are claimed as a credit on your state income tax return — not on your federal Form 1040 directly. They also roll into your total state income tax paid for purposes of federal Schedule A (if you itemize and elect state income tax over sales tax), subject to the federal SALT cap rules in effect for the filing year.
Tax return implications
- Claimed as state income tax withholding on the state return (exact line varies by state — e.g., CA Form 540 Line 71, NY IT-201 Line 72).
- If you itemize federally on Schedule A, Box 5 is part of your state income tax paid (Schedule A, Line 5a), subject to the combined SALT cap in force for the tax year.
- Does not offset federal tax on Form 1040 directly.
Common pitfalls & things to check
- Do not claim Box 5 on Form 1040 — it is state tax, not federal. Claim it on your state return.
- If you live in one state and performed services in another, Box 5 may be withheld by the work state. File a nonresident return in the work state to claim the refund, and a resident return in your home state with a credit for taxes paid to another state.
- States that do not impose individual income tax (Texas, Florida, Tennessee, Nevada, South Dakota, Washington, Wyoming, Alaska, New Hampshire) should never have a Box 5 amount. If they do, it is a payer error — request a corrected 1099-NEC.
For 2025 returns (filed by April 15, 2026)
- Federal SALT cap (single / MFJ)
- $40,000 ($20,000 MFS)
- Combined state + local tax deduction limit on Schedule A (phase-out above $500,000 MAGI; $250,000 MFS).
Values sourced from central tax-year config at build time — they update automatically on FY rollover, so this page stays consistent with the site's calculators.
FAQ
Which states withhold state tax on 1099-NEC?
States with nonresident contractor or performer withholding include California (7% on nonresident contractors above thresholds), Georgia (4% on nonresident construction), North Carolina (4% on nonresident contractors), and Maine. Resident 1099-NEC withholding is rare except when federal backup withholding is also in effect.
Can I elect voluntary state withholding on 1099-NEC?
Some states allow payers to withhold voluntarily on request (you'd typically submit a state form equivalent to W-4). Check your state's Department of Revenue guidance — most 1099-NEC filers instead pay state estimated tax quarterly.
What goes in Box 5 if no state withholding applied?
Box 5 should be blank or zero. An amount in Box 5 with no Box 6 (state ID) or Box 7 (state income) is likely a payer error.
Related 1099-NEC boxes
Box 6 — State / Payer's state number
The two-letter state abbreviation and the payer's state tax identification number — identifies which state Box 5 (state tax withheld) and Box 7 (state income) relate to.
Box 1 — Nonemployee compensation
Total payments of $600 or more your payer made to you as an independent contractor during the year — fees, commissions, prizes, and other compensation for services.
Box 2 — Payer made direct sales totaling $5,000 or more
A checkbox indicator (not a dollar amount) that the payer sold you $5,000 or more of consumer products for resale, on buy-sell, deposit-commission, or any other basis.
Box 4 — Federal income tax withheld
Federal income tax the payer withheld from your payments — almost always backup withholding at 24% triggered by a missing or incorrect TIN on your Form W-9, or an IRS 'B notice'.
Freelancer filing a 1099-NEC? Use the 1099 tax calculator to estimate your federal income tax and self-employment tax, the quarterly estimated tax calculator to stay on top of Form 1040-ES payments, and the W-2 vs 1099 comparison if you're deciding between contractor and employee classification.
Sources
1099-NEC box definitions per IRS General Instructions for Forms 1099-MISC and 1099-NEC, IRC §6041A, §6045(f), and §3406 (backup withholding). Year-specific thresholds pulled from the site's central tax-year config (2025 filing year shown).