Remote Work Tax: State Rules and Cross-Border Basics

Remote work does not change the basic question tax authorities ask: who are you a resident of, and where was the work done? What it changes is how often the answer involves more than one state or country. This guide covers the rules that most often catch remote employees and freelancers out, with the jurisdiction named for each one.

This is general information for US taxpayers, not tax advice. Rules differ by state and country and change often; check with the tax authority or a tax adviser before you file. Last reviewed: October 2026.

Which state taxes your income when you work remotely?

Two principles apply across US states:

1. Residents are taxed on all their income, wherever it was earned (in states that have a personal income tax; a few states have none).
2. Nonresidents are taxed on income sourced to the state, which for work usually means income for work physically done there. New York, for example, says nonresidents "only pay tax on New York source income" (NY Department of Taxation and Finance, nonresident FAQs).

When both apply to the same income, your home state generally gives a credit for tax paid to the other state, so you are not fully taxed twice. You may still pay the higher of the two states' rates, and you file a resident return at home plus a nonresident return in the other state.

States set their own thresholds for when a nonresident must file. Connecticut, for example, requires a nonresident return if Connecticut tax was withheld, estimated payments were made, or the person meets its gross income test and had any Connecticut-source income (Connecticut Department of Revenue Services, "Nonresident Working in Connecticut"). There is no single national dollar threshold, so check each state's own instructions rather than relying on a rule of thumb.

What is the convenience-of-the-employer rule?

It is an exception to "taxed where you work" that applies to employees. Under it, a day you work from home in another state for your own convenience counts as a day worked at your employer's office. Your wages for that day are sourced to the employer's state, not the state you were sitting in.

New York is the best-known example. Its tax department says that if your employer is in New York and you telecommute from another state, "your days telecommuting are considered days worked in the state" unless your employer has established a bona fide employer office at your home location (NY Department of Taxation and Finance). That standard is demanding; for most people working from a spare room, it is not met.

Some other states use similar rules. Connecticut, since tax years beginning on or after 1 January 2019, applies the convenience test to residents of states that apply the same rule. For a New York resident telecommuting for a Connecticut employer, Connecticut applies New York's test (Connecticut DRS). If your employer is in a different state from your home, look up that state's rule on its revenue department website before assuming home days are taxed only at home.

The rule is about employee wages. A self-employed person invoicing clients is not "working for the convenience of an employer"; their income is sourced under the state's rules for business income, which generally look at where the work was done.

Worked example: a New Jersey resident working for a New York employer

Hypothetical example with round numbers. Sam lives in New Jersey and is employed by a company whose only office is in Manhattan. Salary: $115,000. Sam worked 230 days in the year: 92 in the office and 138 at home, by choice. The employer has not set up a bona fide office at Sam's home.

Under New York's rule, all $115,000 is New York-source income on Sam's nonresident return, not $46,000. New Jersey also taxes Sam as a resident on the same $115,000; like most states with an income tax, it generally gives residents a credit for tax paid to another state on the same income, which Sam should confirm in New Jersey's return instructions. The practical effect is that Sam pays at least New York's tax on the full salary. If Sam's employer were in a state that sources wages by where the work is done, only $46,000 would be taxable there.

Do reciprocity agreements help remote workers?

Only employees, and only between specific states. A reciprocity agreement means one state will not tax a resident of the other state on employee wages; the worker pays tax only at home.

Pennsylvania, for example, has reciprocal agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia, and it states that "these agreements apply to employee compensation only" and not to any other class of income (Pennsylvania Department of Revenue, PA Personal Income Tax Guide: Gross Compensation). Employees usually claim it by giving their employer a nonwithholding certificate, which in Pennsylvania is Form REV-419.

For a freelancer, reciprocity does nothing. If you live in New Jersey and spend three weeks working on site for a client in Pennsylvania, the agreement does not cover your self-employment income; check Pennsylvania's nonresident rules for business income.

What changes when a US freelancer works from another country?

Three things stay the same and two things can change.

Stays the same:

• You still report worldwide income to the IRS. US citizens and resident aliens abroad are "subject to tax on worldwide income from all sources" (IRS, U.S. citizens and resident aliens abroad).
• Self-employment tax still applies once net earnings from self-employment reach $400. The rate is 15.3% (12.4% Social Security, 2.9% Medicare), generally on 92.35% of net earnings, and you can deduct half of it when figuring adjusted gross income (IRS Topic 554).
• The country you live in may tax you too, under its own residency rules. Check that country's tax authority.

Can change:

• The foreign earned income exclusion (FEIE). If you pass the bona fide residence test or the physical presence test (at least 330 full days in a foreign country in any 12 consecutive months), you can exclude foreign earned income up to $130,000 for 2025 and $132,900 for 2026 (IRS, Foreign earned income exclusion; IRS, Figuring the foreign earned income exclusion). The IRS is explicit that the exclusion "will not reduce your self-employment tax."
• Totalization agreements. The US has social security agreements with a number of countries (the IRS Schedule SE instructions list them). Under them, you generally pay social security tax only to the country you live in, and you need a statement from that country's agency, or a certificate from the US Social Security Administration, to show you are exempt from US self-employment tax (IRS, Instructions for Schedule SE (2025)).

Worked example: a US freelancer spending a year abroad

Hypothetical example. Maya, a US citizen and freelance developer, lives and works in a country without a US totalization agreement for all of 2026, passes the physical presence test, and has $90,000 of net profit from clients.

Even with every dollar excluded from income tax, Maya still owes about $12,716.60 of US self-employment tax. Freelancers who expect "no US tax abroad" are usually surprised by this line. Her new country's income tax is a separate question.

What about US clients paying freelancers who live abroad?

If you are a foreign freelancer (not a US citizen or resident) doing the work outside the US, IRS Publication 515 says compensation for "services performed outside the United States is foreign source income" and is not subject to US withholding as wages (IRS Publication 515 (2026)). US clients usually ask for Form W-8BEN, which a foreign individual uses to establish foreign status and can use to claim exemption from Form 1099 reporting and backup withholding. Work you physically do while visiting the US is different and can be US-source income.

What is the $600 rule, and did it change?

"The $600 rule" usually means the old threshold for Form 1099-NEC: a business paying a contractor $600 or more in a year had to report it. For payments made in 2026 and later, the IRS instructions raise the threshold to $2,000 ("Enter nonemployee compensation (NEC) of $2,000 or more"), with inflation adjustments possible from 2027 (IRS, Instructions for Forms 1099-MISC and 1099-NEC). For Form 1099-K from payment apps and platforms, the federal threshold reverted to more than $20,000 and more than 200 transactions (IRS newsroom, IR-2025-107).

None of these thresholds decide whether income is taxable. All self-employment income is reportable whether or not a client sends a 1099, which is why your own invoice records matter more than the forms you receive.

Can remote workers deduct a home office?

Self-employed people who use part of their home regularly and exclusively for business can. The IRS simplified method allows $5 per square foot of home used for business, up to 300 square feet, so up to $1,500 (IRS, Simplified option for home office deduction). Employees cannot: the IRS says taxpayers "can no longer claim a deduction for use of a home office as an employee." For the full method, see the home office deduction.

What records should remote workers and freelancers keep?

Every rule above turns on one fact: where you were when you did the work. Keep evidence of it as you go, not at filing time.

• A day-by-day location log: date, city, state or country, and whether it was a work day. A calendar export plus travel receipts is usually enough.
• Invoices that say where the work was done when it was not at your home base, for example "On-site workshop, Philadelphia, PA, 3-5 March". This supports nonresident filings and your home-state credit.
• Contracts that state the work location and whether on-site attendance was required by the client.
• Payment records by currency, if you are paid in foreign currency, with the exchange rate you used for your books.

How InvoiceQuickly fits (and what it does not do)

InvoiceQuickly is an invoicing tool, not a tax tool. Available now: you can describe the work and its location in each line item or in the invoice notes, invoice in USD, EUR, GBP, CAD, AUD, INR or PKR, record full and partial payments, and on Pro export invoices to CSV for your accountant. Not available: it does not track where you worked, calculate income or self-employment tax, convert currencies, file returns or prepare 1099s. Your business tax ID can be copied from settings to new invoice PDFs; check the saved IDs and PDF before sending.

When this guide is not enough

• You moved states during the year. Part-year residency has its own rules for each state; this guide does not cover them.
• Your employer is in one state and you are in another for most of the year. Ask the employer's payroll team which state they withhold for, and check both states' rules.
• You live abroad for more than a few weeks. The foreign country's residency rules, a possible tax treaty and the FEIE interact; a cross-border tax adviser is worth paying for.
• You have an entity (LLC taxed as an S corporation, a company abroad). Business-entity filings follow different rules.

Frequently asked questions

What state do I pay taxes in if I work remotely?

If your home state has an income tax, it taxes all your income. If your employer is in another state, that state may also tax your wages, especially if it applies a convenience-of-the-employer rule, as New York does. Your home state generally gives a credit for tax paid to the other state on the same income.

Do reciprocity agreements apply to freelancers?

No. Reciprocity agreements between states cover employee wages only. Pennsylvania's agreements, for example, "apply to employee compensation only". Freelance income earned in another state is governed by that state's nonresident rules.

Do I pay US tax if I freelance from another country?

If you are a US citizen or resident, yes: you report worldwide income. The foreign earned income exclusion ($132,900 for 2026) can remove some or all of it from income tax if you qualify, but it does not reduce self-employment tax. A totalization agreement with your country of residence may exempt you from US self-employment tax.

What is the $600 rule?

It was the threshold above which businesses had to send Form 1099-NEC to a contractor. For payments made in 2026 and later it is $2,000. The threshold controls reporting, not taxability: all self-employment income is taxable whether or not you receive a form.

Can I deduct my home office if I work remotely for an employer?

Not on your federal return. The IRS says employees can no longer deduct a home office. Self-employed people who use space regularly and exclusively for business can, for example with the simplified $5 per square foot method up to 300 square feet.

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Related reading: self-employment tax, quarterly estimated tax payments, freelance tax deductions, sales tax nexus (a separate question from income tax), invoicing international clients and VAT invoicing. See all tax topics, browse the InvoiceQuickly blog, or start free.