Remote workers may face a double-taxation threat
The number of Americans working from the comfort of their own home soared during the COVID-19 pandemic.
However, the rise of remote work comes with a potentially painful ramification for many employees during the tax-filing season. Depending on where you live and where your employer is based, you may be subject to the income tax rules of two – or more – states.
Individuals can be taxed based on both where they live, and where they earn income. As of 2024, all but nine states impose a tax on income.
When a person lives in one state but works in another, they may have tax liability in both states. However, they will typically receive a tax credit to eliminate double taxation of their income.
However, there are five states that tax people where their office is located – even if that person does not physically work in the state. These individuals may be denied a tax credit in their home states, meaning they may be forced to pay income taxes in two different states.