You work from home…but where do you pay taxes?
In our post “Living in One State, Working in Another“, we explained how to file state taxes if you work in one state but live in another.
However, with all the (exciting) advances in technology, more and more individuals are trading in their commutes to the office to instead work remotely from home.
If you work remotely and the company you work for is in a different state than you live in, then your tax situation will differ from someone who physically travels to another state for work.
We understand that you may have no idea how to file your state taxes. We’re here to help!
File taxes to one or two states?
Depending on your specific tax situation, you may need to file two state tax returns; a resident return and a non-resident return.
As a refresher:
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resident-state: the state where you live. Your resident state taxes ALL of your income, regardless of what state it’s earned in.
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non-resident-state: a state you did not live in over the past year. Different states have different non-resident tax laws on who is required to pay non-resident taxes.
Although certain states have varying non-resident tax laws, generally, if you live in one state and work in another remotely (so you don’t physically travel to another state for work), then you would only file and pay taxes to your resident state.
That means, if you’re working remotely you’ll only have to file a resident tax return to the state you live in.
However, if your W-2 form (that form you receive at the end of the year or beginning of January) lists a state other than your resident state, then you’ll need to also file a non-resident tax return to the state listed. In other words, you’ll file two state tax returns; a resident return to the state you live in and a non-resident return to the state listed on your W-2 (the state your company is located in).
Report ALL earnings on your Resident Tax Return!
The most important thing to keep in mind if you work remotely is that you’ll need to report your income earned (no matter what state it’s from) on a resident state tax return (unless of course, you live in a income tax-free state).
For example, let’s say you work remotely from your home in New York for a company located in California. When you receive your W-2, you see that there’s no reference to CA withholding. In this case, you would not have to file or owe CA state income tax. You’d report all of your income earned from your remote work (and any other earnings) on a New York resident state tax return.
Here’s another example- If you’re working remotely from your New York home for a company in California and receive a W-2 form with two states listed, both NY & CA, then you’ll also need to file a CA non-resident tax return. On this non-resident return, you’ll report only the information listed on that W-2 form.
If you end up being double-taxed, your resident state entoitles you to a credit for the taxes paid to the non-resident state. This should be a dollar-for-dollar reduction.
Who Doesn’t Need to File a State Return (income tax-free states)
You’re off the hook from filing a resident tax return if you live in one of the following income tax-free states;
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
So, if you work remotely from your home in Florida, you won’t need to file a resident tax return. In fact, you probably won’t need to file any state tax returns, unless your W-2 form indicates another state’s tax withholding.
Let us do the state calculations for you.
We know that state taxes are a lot to wrap your head around. Rather than trying to figure out what you owe, we’ll do all your federal and state calculations for you at once. You’ll simply enter the information listed on your W-2 form(s).
Calculating state taxes can be a headache- avoid all tax headaches with RapidTax!
My corporate office is in Oregon, and we have offices throughout the US. For the last 5 years, I headed up the California office. My husband and I just moved to Nevada where I will be working from my home and coming to the California office once or twice a month depending on weather and I do need to get a hotel when I go there, so funds. Question for you, since I just moved and am now a residence of Nevada and I work from my home as a W-2, am I taxed as I’m from California or Nevada? Does my company need to set up anything for me to work in Nevada? Thanks?
Hi Leona,
Generally speaking, you are responsible for taxes in the state where you are a resident and the state where you physically work. You are not responsible for taxes where your company is headquartered (as long as you are not physically working there). In your case, you are living in Nevada. Nevada state residency is based on intent to permanently live there and the time you have lived there. Your company should technically seize to withhold Oregon taxes and California taxes (see CA rules for taxing non-residents for the time you are physically working in the state). If they continue to withhold for these states, then you will need to file a non-resident state return for the state they are withholding for so that you can claim that income back as a tax refund.
Would like to better understand this scenario:
Live in Hawaii, work for Nevada company
3 weeks a month working remotely at home in Hawaii. Travel to Nevada for 1 week a month to work in the office there…so roughly 75%/25%
Get that I would pay state taxes for Hawaii as a resident, but for the 75%, or the whole year?…in other words, does my 1 week in Nevada each month offset the taxes required for Hawaii?
Does my employer have to deduct Hawaii state taxes from my check? Do they need to be set up already to do so? (I’m proposing a remote working situation soon, and we don’t currently have any employees remote in Hawaii, so just want to know what they may come back with if they aren’t set up for Hawaii taxes already.) And can they adjust for 75% if that’s applicable?
Thank you!
Hi Gina,
Great question! Since your employer has never had Hawaii taxes withheld for another employee, a few things could occur with the switch. They could apply to have Hawaii taxes deducted for you. I believe that they would need to pay for this to begin. The other option is that you will continue to have no state taxes withheld from your paychecks (since Nevada is income tax-free). When it comes time to file, you would file a Hawaii resident state return and the amount you owe for the year will be calculated. you’ll want to save up throughout the year so that you are not caught off guard by the amount you owe for Hawaii. These are the most common scenarios for taxpayers in your situation.
My employer put the wrong home address on my W2. However, the tax withholdings don’t appear to reflect the incorrect address (which was out of state). Can one assume that if box 15 on a W2 only has tax withheld for one state, that is the only state an employer reported earnings to?
Hi Steve,
This is pretty common but nothing to worry about. Your mailing address will not affect your taxes. Just be sure to report the correct mailing address when you file your tax return. Do not report the incorrect mailing address just because it is on your W-2 (I’m stressing this because taxpayers tend to do this when they are unsure). If you have access to your pay stubs/statements, then I advise that you double check those to see that your state withholding reflect what you are seeing on your W-2. You should be able to see this on your last pay stub. If you see ANY conflict, then let your employer know ASAP so that they can make those updates.
hi my husband got laid off from a management IT job and now he is chasing jobs in different states. he worked in Tennessee for over a year and has been renting and our combined income was about $170k with 1 dependent his being the major income, i work part time . we own a home in long island ny and my son and i still live in NY due to his high school and also my husbands unstable work. we are stretched very thin due to two homes in 2 states. we take maximum deductions on our paycheck, he has 401k and i have retirement , we just filed our taxes and had to pay 6,000$$ which is killing me. what can we do to reduce our taxable income?? we don’t have any IRA’s, have a 529 plan . what can my husband do so he doesn’t have to pay taxes in 2 states as he does not even live here any more, only we do. we are planning to do so for another year and a half until my son graduates. please help
Hi Anita,
Married couples in similar tax situations as your own will file a joint federal tax return and separate state tax returns (still as married). By doing this, you would file a resident state tax return for NY based on your income. When filing a joint return, your tax is based on a combined adjusted gross income. Filing separate state tax returns makes you responsible for your individual AGI. Your husband would not need to report his income in Tennessee since it is an income tax-free state.
I live in Texas and work for a company located in Texas, but I am currently working on a project that is located in Louisiana. Do I have to pay Louisiana state taxes because I am working on a project in Louisiana?
Hi Spencer,
You are generally responsible for taxes in the state where you physically work and reside. If you are living and working in Texas, it should not matter where your project company is head-quartered.
I reside in Texas and work for a Texas company and usually always work in Texas, but we have a project in Louisiana for the next 6 weeks that I will be working on. What are my tax requirements for this?