Different states have different rules about the requirements taxpayers must fulfill before having to file an individual income tax return in each state. Filing Thresholdsįiling thresholds represent how long a taxpayer must work in a state before the taxpayer must file an income tax return in that state. The ROAM Index considers five factors to develop a comprehensive ranking of each state. is therefore not ranked on the ROAM Index, though it would slot in between the nine states with no income tax and the top-ranked state with one, West Virginia, if it were. lacks the ability to impose harmful tax obligations on remote workers even if it wanted to. The District of Columbia would receive the highest score of any state with an individual income tax, but this is because it is prohibited by the federal Home Rule Act from taxing nonresidents. Though there are differences between these states in terms of taxation of capital gains or dividend income, all nine states with no individual income tax are ranked in a tie for first place in the ROAM Index. Those nine states with no individual income tax do not impose any income tax burdens on taxpayers working remotely in-state, for obvious reasons. Which states are the best? The nine states without an individual income tax and the District of Columbia are set aside from the other 41 states in the ROAM Index.
This report uses laws as they stood as of the end of 2022. Mobile workers are employees who travel around the country as part of their job. Remote workers are defined in this analysis as employees who work either fully remote or on a hybrid schedule of commuting to work and working from home. This inaugural edition of the Remote Obligations and Mobility (ROAM) Index ranks states on the burdens they place upon remote and mobile workers and their employers. Withholding thresholds - Thresholds that employees must exceed in a state before employers are required to withhold income taxes on the employees’ behalf.
#PAYING STATE TAXES WHILE WORKING REMOTELY CODE#
Individual income tax code - Different states’ tax codes affect taxpayers caught up in them differently, and having nexus in higher-tax states is more burdensome for taxpayers than having nexus in others. “Convenience of the employer” rules - Requirements that taxpayers who switch from commuting into a state to working remotely in another state must keep paying income taxes to the state they used to commute into so long as they could possibly have continued commuting. Reciprocity agreements - Agreements between states that allow taxpayers who commute across state lines to pay income taxes only to their state of residence.
Policies that can muddy the waters and even create the potential for double taxation include:įiling thresholds - Thresholds that taxpayers must exceed before being required to file an income tax return in a state. Making things more complicated, remote work subjects taxpayers to changes that can be difficult to predict, as they depend on each state’s laws. While some Americans have returned to in-person work, many maintain remote or hybrid work arrangements.īut while these more flexible forms of work offer benefits to Americans who prefer to avoid commutes or spend more time at home, many of those who switched have been surprised to find that they owe income taxes to multiple states, while businesses have faced withholding and business income tax obligations in new states. The Census Bureau estimates that the number of Americans working remotely tripled between 20, from 9 million to 27.6 million.
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