Let’s be honest—the freedom of remote work is incredible. No commute, flexible hours, maybe even working from a beach house or a mountain cabin. But that freedom comes with a tangled, often overlooked, consequence: your state and local taxes just got a whole lot more complicated.
Gone are the simple days of paying income tax only to the state where your office was. Now, you might owe taxes to multiple states, cities, or even special districts. It’s a maze of rules that can trip up even the most organized person. Here’s the deal: understanding SALT isn’t just about compliance; it’s about protecting your hard-earned money from unexpected bills and penalties.
The Core Principle: It’s All About “Nexus” and Sourcing
First, we need to unpack two key terms. Think of nexus as a “taxable connection.” When you work from your home office in, say, Colorado for a company based in New York, you create a physical presence nexus for yourself in Colorado. That state now has the right to tax the income you earn while physically there.
Then there’s sourcing. This is the rule a state uses to determine which income it gets to tax. Most states use one of two methods:
- Duty Days/Source of Service: Income is taxed based on where the work is physically performed. This is the most common rule and the one causing all the hybrid/remote headaches.
- Company Location (Commercial Domicile): Income is sourced to where the employer is located. Fewer states use this, but it’s still out there.
So, if you live in Illinois but work remotely for a Texas firm, Illinois (duty days state) wants to tax your income. Texas (no state income tax) doesn’t. But if you flew to a client meeting in California for two weeks? You might have just created a filing requirement there. See how it piles up?
The Hybrid Worker’s Tightrope
Hybrid schedules are where things get especially messy. You split your time between a home office and a corporate location in another state. Each state has its own threshold for when you owe taxes—sometimes just one day of work there can trigger it.
You need to track your days with almost obsessive detail. A simple spreadsheet or an app can be your best friend here. Log workdays by physical location. This isn’t just busywork; it’s your primary defense if a state comes asking.
The Convenience of the Employer Rule: A Major Pitfall
Now, here’s a real curveball. A handful of states—New York, Connecticut, Delaware, Nebraska, and Pennsylvania have versions of it—enforce the “Convenience of the Employer” rule. It’s a doozy.
In short, if your employer’s office is in New York but you choose to work from your home in New Jersey for your own convenience (not because the company requires it), New York can still tax 100% of your income. Your home state of New Jersey will give you a credit for taxes paid to NY, but you could still end up with a higher combined bill if NJ’s rates are lower. It feels unfair, and honestly, it often is. But it’s the law in those states.
Local Taxes: The Hidden Layer
Just when you think you’ve got the state thing figured out, local taxes sneak in. Over 5,000 jurisdictions across the U.S. levy local income taxes. Cities like New York City, Philadelphia, and Washington D.C. are well-known, but many counties and school districts in states like Ohio, Pennsylvania, and Kentucky have them too.
If you move during the year, you might owe taxes to two different cities. If you work hybrid across a municipal border, you could be dealing with pro-rating your income between them. It’s a granular level of complexity that payroll departments often struggle to keep up with.
Practical Steps to Stay Compliant (and Sane)
Okay, deep breath. This isn’t hopeless. You just need a system. Here’s a practical roadmap.
- Track Everything. We said it before, but it’s worth repeating. Maintain a detailed log of where you work every single day. This is your non-negotiable first step.
- Communicate with HR & Payroll. Don’t assume they know your situation. Proactively tell them where you are working from and for how long. Provide your day log. Their withholding systems are only as good as the data you give them.
- Understand Your State’s Reciprocity Agreements. Some neighboring states have agreements to avoid double taxation. For example, Maryland, Virginia, and D.C. have one. But these are exceptions, not the rule.
- File in Every Required State. Even if no tax is due, or your employer withheld “enough,” you may still have a filing requirement. Missing a return invites penalties.
- Consider Professional Help. For complex multi-state situations, investing in a tax pro who specializes in multi-state returns isn’t an expense—it’s insurance. They’ll find credits and deductions you didn’t know existed.
What About Moving to a Tax-Friendly State?
It’s a trendy thought, right? Move to Florida or Tennessee (with no state income tax) while keeping your high-paying job based in a high-tax state. Well, states like California and New York are highly motivated to prove you didn’t really leave. They’ll look at your driver’s license, voter registration, where your doctors are, your property ties… the list goes on.
A true move requires a clean, documented break. It’s more than just renting an apartment for six months; it’s establishing a new life center. Otherwise, you risk that former state claiming you’re still a resident for tax purposes. And that’s a battle you don’t want.
The Future is… Still Fuzzy
The pandemic permanently changed where we work, but tax laws are lumbering giants, slow to adapt. We’re stuck in a patchwork system that creates administrative burdens for workers and companies alike. There’s talk of federal legislation to simplify things—like setting a bright-line rule based on your primary residence—but for now, it’s just talk.
So, where does that leave you? In the driver’s seat, honestly. The burden of proof is on you. The states aren’t going to call and remind you. Proactive management of your work location data is the new normal, a small tax (pun unintended) for the immense flexibility we’ve gained. It’s about trading a little bit of that freedom back for certainty—knowing you won’t be blindsided by a letter from a state revenue department years down the line. That peace of mind? Well, you know, it might just be the ultimate remote work perk.