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!
Hi there,
I have somewhat a complicated situation. Until the end of June 2015 I worked in Massachusetts and my employer (from DC) was doing of the withholding for the state. But in the beginning of July 2015 my office there was closed, I became a remote employee and moved to New Hampshire. Unfortunately my employer continued paying taxes to the state of MA for the rest of the year. How do I file that and how do I assure that State of MA gives me the tax return for the amount paid between July and December?
Thanks a lot!
Hi Daniel,
You will file a Non-resident state tax return for MA. On a non-resident state tax return, you are asked to provide dates of when you worked there and the income you earned from that compared to how much of your income was withheld from the state. Once you fill this information out, your tax liability will adjust accordingly. You should receive a refund for the tax you paid when working remotely.
My daughter lives in Colorado (since mid 2015) but works remotely for a company in NYC since October 2015. The company has taken NY state and city income tax out of her pay checks. Reading some comments here it seems that she shouldn’t be paying taxes in New York. Correct? She does fly into New York 2 or 3 times a year for 4 or 5 days of meetings and training. Also, if she does file in NY does she need to also file in Colorado? And would she have to also pay taxes to the State of Colorado?
Sincerely appreciate your comments on this.
Hi Rich,
If your daughter is working remotely from Colorado, she is responsible for Colorado state taxes. The only time she would be liable for NY state and city taxes is when she is physically there working (as mentioned in your comment above). She’ll need to file a Colorado resident return and a New York non-resident return.
My husband and I live in Nevada but my husband’s work for Feds is in California, not remotely, he actually drives there for his shift. I live and work in Nevada. It said we need to put my income for his tax filing for California because we file jointly for Federal. The amount we owe goes up when my income is added. This does not seem right that my Nevada residency and income should be counted on how much we owe California. His income I understand. Any advise??
Hi Nia,
It is common for married couples in similar tax situations to file a joint federal tax return while filing separate state tax returns. This will allow you to qualify for tax benefits federally while still only remaining responsible for your own state taxes; independent from each other.
I got married this year and would like to file taxes married filing jointly. My wife and I lived in Washington DC together until she moved to Tennessee in July for 1 year for a fellowship. We both worked in DC (she for 6 months, me for the entire year). Her permanent residence at the end of the tax year was Tennessee and mine was Washington DC. Tennessee does not have any state income tax and she therefore did not have any state taxes withheld. How do we file our state returns? More specifically, do we need to pay any Washington DC “state” income tax on the income she earned while working and living in Tennessee (i realize she will need to pay DC taxes on the income she earned while working in DC)?
Hi Tom,
Congratulations on getting married and welcome to claiming multiple tax benefits for doing so!
Now, for your taxes, it is common in a situation like yours to file a joint federal tax return and separate state tax returns. Your filing status will still be married and you can still reap the benefits of filing a joint tax return. It will just be less confusing. If you do this, your wife will file a part year resident tax return for DC. She would usually need to do the same for the state she moved to but since Tennessee has no income tax, she won’t need to. You will file a resident state tax return for DC. These will be filed along with a joint federal tax return.
I live in South Carolina and work from a home office. We moved down here in Oct 2014 from New York. My 2015 W2 has my correct and current address listed but the employer ID number listed is NY and i have paid NY state income taxes all year.
Do i file two state returns this year (1) claim NY as a non-resident and (2) South Carolina as a resident?
Hi Matt,
In the tax year that you moved from NY to SC, you would have filed two part-year resident tax returns (one for NY and one for SC). This year, however, you should only need to file a resident SC tax return. Since NY withheld taxes, you can file a non-resident NY state tax return. You should be issued a refund for the tax withheld while you were not physically earning an income in NY.