State nexus, withholding, and filing rules for telecommuters and nonresident employees

The assortment of state income tax nexus, withholding, and nonresident filing rules can create headaches for both employers and employees. Telecommuting work arrangements add another layer of complexity to understanding those rules.  

Many states provided temporary nexus and withholding relief for telecommuting work arrangements during the height of the COVID-19 pandemic. COVID is still with us. And once temporary arrangements have become permanent. 

The U.S. Congress repeatedly tries to simplify these state rules with bills that prohibit: 

• Taxation of an out-of-state business unless it has a physical presence in the taxing state. 
• Witholding or taxation of employee income, except by the employee’s home state or the state in which the employee is present or performs services for more than a specific number of days (e.g., 30 days). 

The Multistate Tax Commission (MTC) also approved a model mobile workforce statute to encourage state uniformity. The MTC proposal sets a 20-work day threshold for nonresident employee withholding and filing requirements. 

What are the nexus and withholding rules for telecommuters? 

Employees who telecommute from a home office usually create: 

• Income tax nexus and a filing requirement for their out-of-state employer if the employee’s activities involve more than the solicitation of sales. 
• An income tax withholding obligation in the state where the employee is working. 

States that may look at additional factors or activities in determining nexus include: 

• Maryland 
• South Carolina 
• West Virginia 
• Wisconsin 

Delaware determines nexus on a case-by-case basis using answers submitted on a questionnaire sent to taxpayers. 

In states with bright-line nexus rules, telecommuting from a home office creates nexus if compensation paid or other activities, like receipts from sales, exceed a statutory threshold. These states include: 

• Alabama 
• California 
• Colorado 
• Connecticut 
• Maine 
• Massachusetts 
• Ohio 
• Pennsylvania 
• Tennessee 
• Virginia 

What are the withholding rules for other nonresident employees? 

Employers can also face withholding tax liability for employees, other than telecommuters, who work even a short period of time in another state. 

10 states have workday withholding thresholds for nonresident employees. 

• Arizona 
• Connecticut 
• Hawaii 
• Illinois 
• Louisiana 
• New Mexico 
• New York 
• North Dakota 
• Vermont 
• West Virginia 

Utah provides withholding relief if an employer can certify that it is not doing business in the state for more than 60 days during the calendar year. 

Six states have wage or income withholding thresholds for nonresident employees. 

• California 
• Idaho 
• Minnesota 
• Oklahoma
• South Carolina 
• Wisconsin 

Georgia and Maine have a combination of an income and work-day threshold. Oregon provides withholding relief if an employer can show that wages paid are $300 or less during the calendar year. 

21 states and the District of Columbia do not have any withholding thresholds based on workdays, wages paid, income received, or other criteria. 

• Alabama 
• Arkansas 
• Colorado 
• Delaware 
• Indiana 
• Iowa 
• Kansas 
• Kentucky 
• Maryland 
• Massachusetts 
• Michigan 
• Mississippi 
• Missouri 
• Montana 
• Nebraska 
• New Jersey 
• North Carolina 
• Ohio 
• Pennsylvania 
• Rhode Island 
• Virginia 

What are the state filing rules for nonresident employees? 

Employees who work in another state shouldn’t wait until the last minute to review state and local income tax laws and nonresident filing requirements in places where they perform services or conduct business. Other reasons individuals may need to file a nonresident state income tax return include receiving income from: 

• A partnership, LLC or S corporation based in another state. 
• A trade or business in another state, like consulting services. 
• Rental property in another state. 
• The sale of real estate in another state. 
• Lottery or other gambling winnings from another state. 

24 states require the filing of an income tax return if a nonresident’s income from state sources for the tax year exceeds: 

• A specific filing threshold 
• The nonresident’s standard deduction 
• The nonresident’s personal exemption 

These states include: 

• Alabama 
• Arizona 
• California 
• Connecticut 
• Georgia 
• Hawaii 
• Idaho 
• Iowa 
• Kentucky  
• Maine 
• Massachusetts 
• Minnesota 
• Missouri 
• Montana 
• New Jersey 
• New York 
• North Carolina 
• Oklahoma 
• Oregon 
• Pennsylvania 
• Vermont 
• Virginia 
• West Virginia 
• Wisconsin 

Many of these states base the filing threshold on a nonresident’s adjusted gross income and filing status. 

17 states have return filing requirements for nonresidents who receive taxable income from state sources, regardless of income level. 

• Arkansas 
• Colorado 
• Delaware 
• Illinois 
• Indiana 
• Kansas 
• Louisiana 
• Maryland 
• Michigan 
• Mississippi 
• Nebraska 
• New Mexico 
• North Dakota 
• Ohio 
• Rhode Island 
• South Carolina 
• Utah

Louisiana exempts wages paid to nonresidents from income tax beginning with the 2022 tax year if the nonresident: 

• Performed employment duties in the state for 25 or fewer days 
• Performed employment duties in more than one state during the calendar year 
• Is not a professional athlete or athletic team staff member, professional entertainer, public figure, or film production employee 
• Does not have income from other state sources during the tax year 

What states offer relief from filing or withholding obligations? 

Reciprocal state agreements allow individuals to work in another state without having to file a nonresident income return. The agreements also relieve employers of their withholding obligations. They are typically made between neighboring states that share borders. 

Reciprocal agreements exist between: 

• The District of Columbia, Maryland, and Virginia 
• Illinois, Iowa, Kentucky, Michigan, and Wisconsin 
• Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin 
• Iowa and Illinois 
• Kentucky, Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin 
• Maryland, the District of Columbia, Pennsylvania, Virginia, and West Virginia 
• Michigan, Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin 
• Minnesota, Michigan, and North Dakota 
• Montana and North Dakota 
• New Jersey and Pennsylvania 
• North Dakota, Minnesota, and Montana 
• Ohio, Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia 
• Pennsylvania, Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia 
• Virginia, the District of Columbia, Kentucky, Maryland, Pennsylvania, and West Virginia 
• West Virginia, Kentucky, Maryland, Ohio, Pennsylvania, and Virginia 
• Wisconsin, Illinois, Indiana, Kentucky, and Michigan 

Conspicuously absent from the states providing one another reciprocity are New York, Connecticut, and New Jersey. As a result, workers who live in one of these states and work in another must file nonresident income tax returns if they meet the filing thresholds.  

To avoid double taxation, all states also allow residents to take a tax credit on their tax return for income taxes they paid to other states. 

State nexus, withholding, and filing rules for telecommuters and nonresident employees  

This chart provides an overview of nexus, withholding, and filing rules for telecommuters and nonresident employees in each state and the District of Columbia. You can find additional details on these topics and more in the CCH State Tax Smart Charts on CCH AnswerConnect.

Alabama

Telecommuter nexus thresholds.

Creates nexus if compensation paid or other activities exceed bright-line nexus threshold factors.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their gross income from state sources exceeds the allowable prorated personal exemption of: 

• $1,500 for single or married taxpayers filing separately; or 
• $3,000 for married taxpayers filing jointly or taxpayers filing as head of household. 

Alaska

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

N/A, because no personal income tax.

Nonresident filing thresholds.

N/A, because no personal income tax.

Connecticut

Telecommuter nexus thresholds.

Creates nexus if sales from state sources exceed bright-line nexus threshold.

Nonresident employee withholding thresholds.

Withholding required if performing personal services in the state for more than 15 days during the tax year. 

Nonresident filing thresholds.

Nonresidents must file if their income exceeds: 

• $12,000 for married taxpayers filing separately; 
• $15,000 for single taxpayers; 
• $19,000 for taxpayers filing as head of household; or 
• $24,000 for married taxpayers filing jointly. 

Delaware

Telecommuter nexus thresholds.

May create nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if they had gross income from states sources. 

District of Colombia

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

No filing requirement, unless nonresidents want a refund of taxes withheld.  

Florida

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

N/A, because no personal income tax.

Nonresident filing thresholds.

N/A, because no personal income tax.

Georgia

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if employed in the state for more than 23 calendar days during a quarter and compensation exceeds the smaller of: 

• 5% of the income received for performing services in all places during the tax year; or 
• $5,000. 

Nonresident filing thresholds.

Nonresidents must file if they are required to file a federal return and income was received from state sources, unless they only received employment income not more than the smaller of: 

• 5% of the income received for performing services in all places during the tax year; or 
• $5,000.

Hawaii

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if performing services in the state for more than 60 days during the calendar year. 

Nonresident filing thresholds.

Nonresidents must file if their income exceeds the threshold for their filing status. 
 
Single 
under 65: $3,344 
65 or older: $4,488 
 
Head of household 
under 65: $4,356 
65 or older: $5,500 
 
Married filing jointly 
under 65: $6,688 
65 or older (one): $7,832 
65 or older (both): $8,976 
 
Married filing separately 
under 65: $3,344 
65 or older: $4,488 
 
Qualifying widow(er) 
under 65: $5,544 
65 or older: $6,688 

Idaho

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if performing services in the state for compensation of $1,000 or more during the calendar year.  

Nonresident filing thresholds.

Nonresidents must file if their income from state sources exceeds $2,500. 

Illinois

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if performing services in the state for more than 30 working days during the tax year. 

Nonresident filing thresholds.

Nonresidents must file if they earned enough taxable income from state sources to have tax liability.  

Indiana

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria.  

Nonresident filing thresholds.

Nonresidents must file if they have income from state sources, other than certain interest, dividends, or retirement income. 

Iowa

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their income from state sources was $1,000 or more.

Kansas

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if they received income from state sources.

Kentucky

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if they have:

• any gross income from state sources and gross income from all sources that exceeds the modified gross income for their family size; or 
• self-employment gross receipts from state sources that exceeds the modified gross income for their family size. 

Modified gross income and family size threshold: 
$13,590 for a family size of 1; 
$18,310 for a family size of 2; 
$23,030 for a family size of 3; or 
$27,750 for a family size of 4 or more.  

Louisiana

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if performing employment duties in the state for more than 25 days during the calendar year. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file federal return; and 
• they received income from state sources. 

Maine

Telecommuter nexus thresholds.

Creates nexus if compensation paid or other activities exceed bright-line nexus threshold factors.

Nonresident employee withholding thresholds.

Withholding required if: 

• performing services in the state for more than 12 days; and 
• earning more than $3,000 in gross income from all sources during the tax year. 

Nonresident filing thresholds.

Nonresidents must file if they had income from state sources resulting in state income tax liability, unless they: 

• spend 12 or less working or business days in the state; and 
• make $3,000 or less in income. 

The 12-day threshold does not include up to 24 days performing certain personal services, like training and site inspections. 

Maryland

Telecommuter nexus thresholds.

May create nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return; and 
• they received income from state sources. 

Massachusetts

Telecommuter nexus thresholds.

Creates nexus if sales from state sources exceed bright-line nexus threshold.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their income from states sources was more than: 

• $8,000; or 
• their personal exemptions multiplied by the ratio of state source income to total income.

Michigan

Telecommuter nexus thresholds.

Creates nexus, if:

• taxpayer's representative has physical presence in the state for 1 or more days; or
• sales activities exceed gross receipts threshold.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if they received income from state sources. 

Minnesota

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if wages paid expected to exceed the income tax filing threshold for nonresidents. 

Nonresident filing thresholds.

Nonresidents must file if their gross income from state sources is $12,900 or more. 

Mississippi

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria.  

Nonresident filing thresholds.

Nonresidents must file if they have income, other than gambling income, that was taxed by the state. 

Missouri

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return; and 
• they received $600 or more of income from state sources. 

Montana

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their federal gross income and income from state sources, excluding unemployment compensation, exceeds the threshold for their filing status. 
 
Single, Married Filing Separately 
under 65: $5,090 
65 or older: $7,800 
 
Head of Household 
under 65: $10,180 
65 or older: $12,890 
 
Married Filing Jointly 
under 65: $10,180 
65 or older (one): $12,890 
65 or older (both): $15,600 

Nebraska

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents and part-year residents must file if they have income from state sources. 

New Hampshire

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

N/A, because state tax applies only to interest and dividend income and withholding not required. 

Nonresident filing thresholds.

N/A, because nonresidents are not subject to the interest and dividend income tax. 

New Jersey

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their income exceeds: 

• $10,000 for single taxpayers and married taxpayers filing separately; or 
• $20,000 for married taxpayers filing jointly and taxpayers filing as head of household. 

New Mexico

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if performing services in the state for more than 15 days during the calendar year. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return; and 
• they received income from any business transaction, property, or employment in the state. 

New York

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding required if performing services in the state for more than 14 days during the calendar year, but not required if employee will work only a short period of time in the state and wages do not exceed personal exemption amount. 

Nonresident filing thresholds.

Nonresidents must file if their income from state sources and state AGI (federal amount column) is more than the standard deduction of: 

• $8,000 for single or married taxpayers filing separately; 
• $11,200 for taxpayers filing as head of household with a qualifying dependent; or 
• $16,050 for married taxpayers filing jointly or taxpayers filing as a qualifying surviving spouse. 

North Carolina

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their gross income from state sources exceeds the standard deduction of: 

• $12,750 for single or married taxpayers filing separately; 
• $19,125 for taxpayers filing as head of household; or 
• $25,500 married taxpayers filing jointly or taxpayers filing as a surviving spouse

North Dakota

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withhold required if performing employment duties in the state for more than 20 days during the tax year. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return; and 
• they received income from state sources. 

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding relief provided if an employer can show that wages paid are $300 or less during the calendar year. 

Nonresident filing thresholds.

Nonresidents must file if their gross income from state sources exceeds: 

• $2,420 for single or married taxpayers filing separately; 
• $3,895 for taxpayers filing as head of household; or
• $4,840 married taxpayers filing jointly or taxpayers filing as a surviving spouse.

Pennsylvania

Telecommuter nexus thresholds.

Creates nexus if sales from state sources exceed bright-line nexus threshold.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if: 

• their total gross taxable income received from state sources is more than $33, even if no tax is due; or 
• there was a loss from any transaction as an individual, sole proprietor, partner in a partnership, S corporation shareholder, or association member. 

Rhode Island

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return and have income from state sources; or 
• they are not required to file a federal return and have state modifications increasing their federal AGI. 

South Carolina

Telecommuter nexus thresholds.

May create nexus.

Nonresident employee withholding thresholds.

Withholding required if wages paid for performing services in the state are more than personal exemption amount. 

Nonresident filing thresholds.

Nonresidents must file if: 

• their state income tax was withheld; or 
• their income was taxed by the state. 

Tennessee

Telecommuter nexus thresholds.

Creates nexus if compensation paid or other activities exceed bright-line nexus threshold factors.

Nonresident employee withholding thresholds.

N/A, because no personal income tax.

Nonresident filing thresholds.

N/A, because no personal income tax.

Texas

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

N/A, because no personal income tax.

Nonresident filing thresholds.

N/A, because no personal income tax.

Utah

Telecommuter nexus thresholds.

Creates nexus.

Nonresident employee withholding thresholds.

Withholding relief if an employer can certify that it is not doing business in the state for more than 60 days during the calendar year. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return; and 
• they received income from state sources. 

Virginia

Telecommuter nexus thresholds.

Creates nexus, if any apportionment factor is positive. 

Nonresident employee withholding thresholds.

No thresholds based on work days in the state, wages paid, income received, or other criteria. 

Nonresident filing thresholds.

Nonresidents must file if their income from state sources exceeds: 

• $11,950 for single and married taxpayers filing separately; or 
• $23,900 for married taxpayers filing jointly. 

West Virginia

Telecommuter nexus thresholds.

May create nexus.

Nonresident employee withholding thresholds.

Withholding required if performing employment duties in the state for more than 30 days during the calendar year. 

Nonresident filing thresholds.

Nonresidents must file if: 

• they are required to file a federal return and have income from state sources; or 
• they are not required to file a federal returns and state AGI is more than $2,000 for each personal exemption or $500 for zero exemptions.