Due to coronavirus, individuals are now working remotely more than ever before. Depending on certain circumstances, some people may have left their homes to seek either temporary or permanent residence in another location. If state lines were crossed, there may be some new tax implications to be aware of.
- 13 states will not require tax returns from temporary income. States currently waiving the income tax requirement for COVID-19 relocations are Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island, and South Carolina. This means if you are currently working remotely in these states, you will still source your wages the same as prior to the pandemic.
- Some states have no income tax requirements at all. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have an income tax, along with New Hampshire and Tennessee only taxing investment income. If your employer is allowing for permanent remote work, these states can be considered as a new place of residence.
- Certain states have reciprocity agreements. Similar to states with no income tax, there are some that have reciprocal tax agreements where residents of the state won’t be required to pay tax in another state just for working there. An example is if you work in Pennsylvania but live in New Jersey, income taxes will only be due in New Jersey. This can help in situations where neighboring states have lower tax rates.
- Establishing residency in a new state. For many states, 183 days is the minimum needed to be spent at one address to be considered a resident. In addition to owning the residence, other steps such as changing your driver’s license, voter registration, and credit card/travel receipts can help support the argument of establishing a new tax residence.
As we continue to learn more about the economic stimulus programs, we will be updating our social media pages and website with articles and links. If you want more information on COVID 19 relief or need help with tax preparation, contact our tax professionals at The Innovative CPA Group at 203-489-0612. Or contact us online.