The number of Americans working from the comfort of their homes skyrocketed during the COVID-19 pandemic.
However, the rise of remote work brings with it a potentially painful consequence for many employees during tax season. Depending on where you live and where your employer is based, you may be subject to income tax rules from two – or more – states.
Individuals can be taxed based on where they live and where they earn income. In 2024, all states except nine impose an income tax.
When a person lives in one state but works in another, they may have tax obligations in both states. However, they will typically receive a tax credit to eliminate double taxation on their income.
However, there are five states that tax individuals based on the location of their office – even if that person does not physically work in the state. These individuals may be denied the tax credit in their home states, meaning they could be forced to pay income tax in two different states.
The so-called employer convenience rule allows states to impose income tax on employees, even if they work remotely in other states, as long as they are employed by a company headquartered within their borders. Unless employees live and work in a state without income tax, they may be taxed twice.
Connecticut, Delaware, Nebraska, New York, and Pennsylvania have employer convenience rules in place, although the specifics may differ slightly from state to state.
Source: Fox News