State Residency Strategies for Remote Workers

Why residency strategy matters for remote workers

Remote work lets you live further from your employer, but state tax rules haven’t all adjusted to that flexibility. Where you are legally a resident (your domicile) and where you perform work affect state income taxes, withholding, unemployment insurance, and eligibility for state benefits. The wrong or poorly documented move can trigger multiple state returns, double taxation, and audits that are costly to resolve.

In my practice advising remote employees and freelancers, I regularly see two outcomes: people who save thousands by relocating and documenting a new domicile, and people who fail to sever ties with their old state and end up paying unexpected multistate taxes. The difference is process and documentation.

(Authoritative resources: New York Dept. of Taxation & Finance; California Franchise Tax Board; IRS guidance on domicile concepts.)

Key concepts to understand

• Domicile (legal residence): Your primary, permanent home — the place you intend to return to and remain. Domicile is subjective and proven by ties and intent.
• Statutory residency: Many states apply objective rules (for example, the 183‑day test) or a combination of days + a permanent place of abode to declare you a resident for tax purposes.
• Source of income rules: Some states tax income based on where services are performed or where the employer is located (e.g., New York’s ‘‘convenience of the employer’’ rule can make telecommuters’ wages taxable to NY if they work remotely for their own convenience rather than employer necessity).
• Part‑year and nonresident returns: Moving mid‑year or working across states typically requires filing multiple state returns and claiming credits for taxes paid to other states when allowed.

What strategies work (actionable steps)

1. Choose a domicile intentionally

• Pick a state that fits your long‑term goals (taxes, family, healthcare, cost of living). States like Texas and Florida have no personal income tax; others offer low rates or favorable treatment for retirement income.
• Understand state-specific traps. New York, California, and a few others vigorously assert residency; read state guidance before you relocate.

1. Sever ties with the old state and build ties in the new state (document intent)

• Close or rent out your old residence rather than maintaining it as a primary home when possible. Ownership alone doesn’t guarantee residency, but keeping a house and most personal ties in your old state is a red flag.
• Establish multiple objective ties in the new state: obtain a driver’s license, register to vote, register your vehicle, update your primary mailing address, and open local bank accounts.
• Take formal steps: sign a long‑term lease or a mortgage, enroll children in local schools, and transfer memberships and medical care.

1. Track days carefully

• Use a daily travel log or digital tools (calendar, phone location history, credit‑card statements) to prove where you spent time. Many state residency tests hinge on day counts.
• If you’re a seasonal resident or split your time among many states, plan your stay to avoid statutory residency thresholds in high‑tax states.

1. Manage employer withholding and work patterns

• Talk with payroll about proper state withholding. Employers often withhold based on where you perform work or where the company is located—review pay stubs and state W‑4 equivalents.
• Be aware of ‘‘convenience of the employer’’ sourcing rules used by some states (notably New York). If you work remotely for your convenience while employed by a company in that state, wages may still be taxable there.

1. Seek credits and reciprocity where applicable

• When taxed by two states, nonresident credits can reduce double taxation (subject to state rules). Some neighboring states have reciprocity agreements for wage withholding—check state tax sites.

1. Keep consistent tax filings

• File part‑year and nonresident returns promptly. When changing domicile, file the final return as a part‑year resident in the old state and a part‑year resident in your new state where required.

Documentation checklist (what to keep)

• Driver’s license or state ID issued by the new state
• Voter registration in the new state
• Lease or mortgage documents showing your new primary address
• Utility bills and mobile phone bills with the new address
• Vehicle registration and insurance reflecting the new state
• Bank account statements showing local branch usage
• Employment records and employer letters about remote work location
• Medical and school records indicating family ties
• Travel logs, calendar entries, and credit card statements that document day counts
• Mail forwarding and change‑of‑address records

Save files digitally and keep a dated archive you can provide if a state tax authority questions your residency.

Tools and methods to track days

• Phone GPS location history (Google Timeline, iPhone Significant Locations)
• Calendar exports combined with time‑stamped meeting locations
• Credit/debit card or bank transaction histories showing location
• Dedicated travel log apps or simple spreadsheet logs with receipts

Accuracy matters: sporadic or incomplete logs reduce credibility in an audit.

Filing and withholding considerations

• Withholding: If payroll withholds the wrong state tax, you could end up with unexpected tax bills and refunds delayed. Tell payroll your correct state of residence and provide state forms where required.
• Multistate returns: Expect to file returns in any state where you performed significant work, earned sourced income, or meet residency tests. Use nonresident schedules and claim credits where a state allows.
• Part‑year returns: File in both states when you change residency mid‑year. Your income will be allocated between the states based on their rules.

See our guides for more on filing specifics: Multistate Filing for Remote Workers: Residency and Withholding and the State Tax Residency Checklist for Remote and Hybrid Workers.

Common state rules and traps to watch

• 183‑day/statutory rules: Several states declare you a resident if you spend more than 183 days there, or if you have a permanent place of abode and spend a threshold number of days inside the state (e.g., New York’s statutory residency test).
• Convenience of employer rule: New York and a few other states may tax remote wages based on whether remote work is for the employee’s convenience. Read your employer’s policy and state guidance (New York Dept. of Taxation & Finance) before assuming out‑of‑state work is tax‑free.
• Dual domicile/part‑year disputes: States can contest your claim to domicile if you continue maintaining significant ties (mailing address, club memberships, family residence) in the old state.

Real‑world planning examples (brief)

• Moving from a high‑tax to a no‑income‑tax state: A client who moved from New York to Florida saved state income tax by establishing clear resident ties in Florida—changing their driver’s license, voter registration, and leasing out their NY apartment rather than maintaining it as a primary home.
• Seasonal or digital nomad strategy: Another client split time across several states and used meticulous day tracking to avoid surpassing statutory thresholds in high‑tax states while maintaining domicile in a low‑tax state.

Audit preparedness and defending your claim

• Proactively assemble the checklist items listed above before a state asks for proof.
• If audited, provide contemporaneous records (not reconstructed logs). States place higher weight on objective, date‑stamped documents.
• Consider engaging a tax attorney or CPA experienced in state residency disputes. In my experience, early professional involvement reduces the risk of costly assessments and penalties.

When to hire professional help

• You have high income, complex business activities, or property and family ties in multiple states.
• You face a residency audit or a large proposed assessment.
• You want to design a tax‑efficient residency plan that anticipates state audits and legal challenges.

For actionable steps on how to change residency and stay compliant, see our article: How to Stay Compliant When Changing State Residency for Tax Purposes.

Final checklist — immediate next steps

• Decide your intended domicile and read that state’s residency rules.
• Take actions that establish ties there (license, voter registration, lease/mortgage).
• Sever or minimize ties to your former state.
• Start and maintain a robust day‑counting system.
• Update payroll and review withholding.
• Consult a tax professional before a move if you have significant income or multistate exposure.

Sources and further reading

• New York State Department of Taxation and Finance, guidance on residency and convenience‑of‑the‑employer sourcing.
• California Franchise Tax Board, residency and domicile guidance.
• IRS general guidance on domicile and residency concepts (see IRS materials and publications related to tax residence).
• Consumer Financial Protection Bureau, state tax resources and consumer guidance.

Professional disclaimer: This article is educational and not individualized tax or legal advice. Tax rules vary by state and change over time. Consult a licensed tax professional or attorney for advice tailored to your situation.

(Last reviewed: 2025)