Remote Work and State Taxes: What You Need to Know

Remote work has complicated state tax situations for millions of Americans. Here's what you need to know to stay compliant and minimize your tax burden.

Where Do You Owe Taxes?

Generally, you owe income tax to:

• The state where you perform the work (residence state)
• Sometimes, the state where your employer is located
• Any state where you work temporarily (over certain thresholds)

Convenience of the Employer Rule

Some states (NY, PA, DE, NE, AR) tax remote workers if the employer is based there, even if you never set foot in the state. This can lead to double taxation.

Multi-State Tax Issues

• Reciprocity agreements: Some neighboring states have agreements to prevent double taxation
• Tax credits: You may get credits for taxes paid to other states
• Nexus rules: Working in a state for even one day might create tax obligations

Digital Nomad Considerations

• Establish a tax home in a low-tax state
• Track days spent in each state
• Understand each state's presence threshold
• Keep detailed records of work locations

Tax Planning Strategies

• Consider establishing residency in a no-tax state
• Negotiate tax gross-ups with your employer
• Time your moves strategically
• Understand state residency rules (183-day rule)

Record Keeping

Maintain detailed records of:

• Work locations and dates
• Business purpose for travel
• Time spent in each state
• Home office expenses

The Bottom Line

Remote work offers flexibility but comes with tax complexity. Consider consulting a tax professional familiar with multi-state taxation to ensure compliance and optimize your tax situation.