Remote Work Taxes: Which State Do I Pay In?

If you work remotely for a company in another state, a natural question follows: which state’s income tax do you actually pay? For most people the answer is simpler than feared — but a few well-known exceptions can catch you out.

The general rule: where you work

State income tax usually follows where you physically perform the work — which, for a remote worker, is where you live. Your employer’s location generally doesn’t determine your state tax. So if you live in Texas (no income tax) and work remotely for a New York company, you typically owe no state income tax.

The big exception: “convenience of the employer”

A handful of states — most notably New York, plus Connecticut, Delaware, Nebraska and Pennsylvania — apply a “convenience of the employer” rule. If your employer is based there and you work remotely by choice (not because the job requires it elsewhere), they may still tax your income. This can even lead to being taxed by two states.

Reciprocity agreements

Many neighbouring states have reciprocity agreements so you only pay tax to your home state — common across the Midwest and Mid-Atlantic. If you live and work across such a border, you usually file in just one.

If you moved mid-year

Relocating during the year often means filing part-year resident returns in both states, splitting your income by the time spent in each.

Compare states

Thinking about where to base yourself? See our take-home pay by US state ranking to see how much your location changes what you keep.