What to Know About Working Remotely in Another State

Imagine setting up your laptop by a serene beach, in a cozy mountain cabin, or turning your road trip adventures into a 'workcation' while keeping up with your professional duties. As remote work becomes more flexible, this dream is becoming a reality for many. However, beneath that idyllic remote setup, tax implications may lurk. Being aware of these issues now can prevent costly surprises later.

Review Your Withholdings

It's crucial to check your current tax withholdings, especially if your employer assumes you're working from your usual location. For those who are self-employed, make sure to adjust your quarterly estimated tax payments accordingly. This small step will ensure you're not under-withheld when tax season rolls around.

Avoid Double Taxation

Understanding reciprocal tax agreements can save you from paying taxes to two different states on the same income. Some states have agreements that exempt you from paying in both locations. Be sure to investigate whether an agreement exists between your home state and the state where you're temporarily residing. Solutions might involve filing in both states or applying for credits to prevent being taxed twice.

You May Owe Local Taxes

Did you know that some cities impose local taxes on temporary workers? Rules can vary dramatically from place to place, so it's vital to do your research before you settle down in a new city for work. Take the time to investigate any local regulations that might affect your tax obligations.

State Taxes May Still Apply

Even a short stint working in another state can trigger tax responsibilities. States such as Michigan and Kentucky have rules that enforce tax collection for remote work, even for brief periods. Always verify whether the state you're visiting imposes income tax on short-term employment. This knowledge can help you avoid unexpected tax bills later.

Stay Ahead

With proactive research, you can ensure that remote work and travel coexist harmoniously. Before embarking on your next work adventure, spend some time understanding both state and local tax rules. Reach out to a tax advisor if needed or take steps like adjusting withholdings and researching local laws. This foresight will bring peace of mind and make sure your dream of blending work and travel is a rewarding experience.