As remote work has become more prevalent in society, it is important to understand the tax impact this might have. It was reported that as of 2023, 12.7% of full-time employees work remotely and a further 28.2% work a hybrid model. Let’s get into the details of how remote or hybrid work could impact you at tax time.
Why Remotely?
Generations of all ages are participating in remote work for a variety of reasons. From the reduction of stressful commutes to more time with family, remote work has provided an opportunity for the young and old alike. Some retirees are finding joy in a remote, second career that works with a lower-mobility lifestyle while millennials are feeling relief of caring for their children or parents while managing their career. These perks can be super impactful, but what does it mean at tax time?
Double Taxation
The first element of remote work and taxes to consider is determining if you are subject to double taxation. Double taxation is the concept of paying taxes on your income in two places – your home state and the state where your company resides.
While a Supreme Court ruling in 2015 came down against double taxation, it still may require individuals to file for a refund to gain that money back. Consider researching your individual state laws to ensure you are receiving your full benefits.
Tax Deductions
Another remote working element to consider at tax time is tax deductions. In some situations, it is possible to deduct expenses related to remote work like home office expenses, travel, office space, etc. Take a look at deduction options to consider if you are new to remote work.
Residency
Taxable income can be affected by the state you choose to work remotely from. Avoiding residency in a high-tax state can make a big difference in taxable income. Considering state tax implications is an important step in managing your taxes this year.
What You Can Do
- Talk to Your HR Rep: Asking questions is always a good idea. Reach out to your HR representative about tax questions pertaining to your worker status or how the company handles remote workers. An HR representative may not have all of the answers to specific tax questions, but they may be able to give you more information on how your company processes payroll and what implications are impactful to you.
- Be Mindful of Tax-Friendly States: Every state has its own tax rules so it may be advantageous to gather information around tax-friendly states. With remote side hustles on the rise for retirees, those looking to retire soon or are already retired may consider tax advantages available to them based on their state of residence.
- Talk to a Pro: While gathering information on your own and reaching out to a company representative is certainly helpful, sometimes a tax professional is an advantageous solution. Consider seeking out a tax professional to ensure you are filing taxes correctly given your worker status and residence.
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Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.
