Remote Work and Taxes: What You Need to Know About Dual Residency

Are there tax ramifications when you work remotely? The answer is, just like with most areas of the law, it depends. It depends on several factors, including your domicile address and where you are physically present for at least 183 days of the year.

What does the term “domicile” mean? Domicile means that a resident considers a state to be their permanent place of legal residency or the place they return to after being away. An individual can have only one domicile at a time.

You can also be considered a “Statutory Resident” of a state if you have a home within that state and spend a significant amount of time within that state. You will be required to pay income taxes in the Statutory Residency State, as well as in your domicile state. This is called Dual Residency. Some examples of when you will be considered a dual resident and have to pay taxes in both states are:

• You move to another state but fail to establish a domicile there.

• You have homes in both states.

• You lived in one state, move to another state and then return to the original state.

• You are living in one state while working in another.

• You have relocated to another state on a temporary basis.

If you are considered a resident of a state, you will owe taxes to that state on all of your income, regardless of whether it was earned within the state or elsewhere. You may need to file as a part-year resident in each state OR you can also be considered a nonresident of a state and still owe taxes, but will owe taxes only on the portion of income earned or sourced within that state.

Determining your state residency tax-filing status and liability can be complicated, but Smart Counsel can help you examine your specific situation and guide you on how to best handle (and minimize!) your taxes for the current year and in the future.