Where Do You Pay Taxes If You Work Remotely?

The increasing prevalence of remote work has given many benefits to workers. While many doctors, nurses, and other medical professionals can't always work remotely, it is important to understand the details of remote work. The question of where to pay taxes is one that more people are asking as remote work becomes the norm rather than the exception. Whether you’re logging in from a beach in Florida or a cabin in Colorado, figuring out where—and how—you owe taxes can be confusing.

Are taxes paid based on where you live or work? Do you pay double taxes if you work remotely? In this guide, we’ll break down how taxes work when you work remotely, what rules to watch for across state lines, and how to take advantage of potential tax write-offs.

How Do Taxes Work When You Work Remotely?

It is possible for income to be taxed both where you live and where your office is. In most cases, your income will only be taxed in one of those two places. Nine states do not have a state income tax—Alaska, Florida, Nevada, South Dakota, New Hampshire, Tennessee, Texas, Washington, and Wyoming—but if you live in one of the other states or the District of Columbia, then you are required to pay state income tax in the state where you live.

While in most cases you will only pay taxes in the state where you live, there are a few states that have what is called a “convenience of the employer” rule. In those states, if you are working remotely for your OWN convenience, you will owe taxes in the state where your employer is located. Only if you are working remotely for the “convenience of the employer” (like if your employer mandates that you work in a different state) will you avoid this double taxation (though see below for more information about double taxation).

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Are Taxes Paid Based on Where You Live or Work?

Answering the question of whether taxes are paid based on where you live or where you work can get complicated. As a remote worker, you are required to pay tax on all the income that you earn in the state where you live (assuming you live in a state that levies an income tax). Additionally, depending on where your employer is located, they may be required to withhold taxes in a state where they have physical locations.

Do You Pay Double Taxes If You Work Remotely?

There may be some situations where remote workers (or any workers who live in a different state than where their employer's office is located) owe tax in two different states. Thankfully, every state that levies an income tax has a credit for taxes paid to another state. However, depending on the rates in the different states, you may end up paying more in state income taxes than you would if you lived and worked in the same state.

As an example, imagine you live in Vermont and your income subjects you to a 2% state income tax. But you are a remote worker whose employer is located across the border in New York, which has a convenience of employer law. You do not meet the test, so your income is also subject to New York state income tax at a (hypothetical) rate of 6%. Vermont will give you a credit for the taxes you paid to New York, but you won't get a refund of the additional taxes that you paid. Had you both lived and worked in Vermont, your income would only be subject to a 2% tax rate instead of 6%.

How Do State Taxes Work for Remote Workers?

The states that have the absolute best taxes for remote workers are the ones that do not charge any income tax at all. However, several of the states that do have an income tax offer state income tax reciprocity agreements, often with bordering states. Some examples of these are:

• Ohio has a reciprocity agreement with the five states that it borders—Michigan, Indiana, Kentucky, West Virginia, and Pennsylvania.
• North Dakota has a state tax reciprocity agreement with Montana and Minnesota (but not South Dakota, which does not have a state income tax).

If you live and work in two states that have reciprocity agreements, state income tax paid in the state where you work is counted as if you had paid it to the other state. This is better than a tax credit, since a reciprocity credit is typically equal to the lesser of the amount paid to the other state or the amount that would have been paid on one’s income to one’s home state.

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The Bottom Line

Navigating taxes as a remote worker can be tricky, especially when state laws vary so widely. Some states, like Texas or Florida, don’t impose a state income tax at all, making them particularly appealing for remote professionals. Others have state income tax reciprocity agreements that simplify tax obligations for those who live in one state and work in another. But if you’re not careful, you could end up facing double taxation, paying income taxes to both your resident state and your employer’s state.

Understanding the rules in each state and planning accordingly can help you avoid surprises and make the most of your remote work lifestyle—both personally and financially.

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