What to Know About Working Remotely in Another State

Imagine setting up your laptop on a sun-drenched beach, in a cozy mountain cabin, or even while road-tripping across the country. With the flexibility of remote work, these destinations aren't just vacation spots; they can also become your temporary office. However, beneath the allure of working from your dream location, unexpected tax implications might be lurking. Being informed now can prevent costly surprises later.

State Taxes May Still Apply

Did you know that even a few days of remote work in another state can trigger tax responsibilities? States like Michigan and Kentucky are known to enforce these rules. Before you embark on a workcation, verify whether the state you’re visiting imposes income tax on short-term work. This small step can save you from unanticipated tax bills.

Review Your Withholdings

Your current tax withholdings might assume you're working in your usual location. It's important to examine these withholdings, especially if your remote adventures are taking you elsewhere. For our self-employed friends, it might be necessary to adjust your quarterly estimated tax payments to reflect your current work situation.

Avoid Double Taxation

The notion of double taxation haunts many remote workers. Thankfully, reciprocal tax agreements between certain states can help you avoid this pitfall. Check if such an agreement exists between your home state and the state you're temporarily working from. Solutions might include filing in both states or applying for credits to neutralize any potential double tax.

You May Owe Local Taxes

Some cities have their own tax quirks, imposing local taxes on temporary workers. These rules can vary drastically, making due diligence essential before setting up shop in a new city. Knowing these local details will armor you against unexpected liabilities.

Stay Ahead

Proactive research is your best ally. Before you pack your bags, check the state and local tax rules tied to your destination. Planning ahead ensures that remote work and travel can coexist harmoniously. Ultimately, staying well-informed is key—whether it’s adjusting withholdings, contacting a tax advisor, or researching local laws. Take action now to secure the peace of mind that makes remote work exhilarating rather than taxing.