If you work remotely, where do you pay taxes?

A person who lives and works remotely in Washington and works for a company that is based in California can work without having to pay California state taxes. In contrast, a remote worker who travels to other states and works from there may have to file a nonresident tax return in those states.

Remote workers do not have to file nonresident state tax returns unless they physically travel to another state and perform work while they are there. In certain cases, a reciprocity agreement may protect workers from paying taxes in different states. In addition, not all states levy a state income tax.

As of 2020, employees are free from state taxes in:

• Alaska

• Florida

• Nevada

• New Hampshire

• South Dakota

• Tennessee

• Texas

• Washington

• Wyoming

The state constitution of Texas forbids the government from creating a state income tax. Remote workers in these states who do not perform work in other states only have to file federal tax returns. Workers in New Hampshire and Tennessee may be subject to state taxes on investments and other income, but they do not charge state taxes on wages.

For remote workers in the United States, the physical location remains the determining factor for which taxes workers pay. Employers who hire employees outside of their home states must fulfill their duties to withhold state taxes on a state-by-state basis.

The United States does not levy taxes against non-U.S. citizens living outside of the country and working for a U.S.-based business. If you are a citizen of the United States working remotely from another country, you may need to fill out some forms, but in most cases, you will only owe taxes in the country where you live and work.

U.S. citizens high earners (above $100,000 per year) may owe U.S. taxes even when working abroad. Regardless of income, U.S. citizens working overseas should still plan to file tax returns, even if they don't owe anything.