The changing landscape of remote work and state income taxes

"The expansion of remote work has shifted from a temporary adjustment to a lasting feature of the modern labor market. Professionals who once relied on fixed office locations now perform their duties across multiple jurisdictions, often in states different from where their employers are located. While this shift has increased flexibility and efficiency in the workforce, it has also renewed attention on how state income tax systems interact with increasingly mobile work arrangements."

"States generally assert taxing authority over income based on two core principles: residency and source. States of residence typically tax their residents on all income, regardless of where it's earned. At the same time, source-based taxation allows a state to tax income earned within its borders by nonresidents. To reduce the risk of double taxation, most states provide credits for taxes paid to other states on the same income."

Remote work has transitioned from a temporary adjustment to a durable feature of the labor market. Professionals now perform duties across multiple jurisdictions, often in states different from employers. State income taxation remains grounded in physical presence and traditional sourcing rules designed for location-specific work. States assert tax authority based on residency and source, with residents taxed on worldwide income and source states taxing income earned within their borders. Most states offer credits to mitigate double taxation. Remote and hybrid work raise allocation questions when services occur in multiple states, and some states apply doctrines like employer-convenience rules.

Read at Accounting Today