Digital Nomads & Remote Workers: What to Know About State Taxes

The freedom to work from anywhere is one of the biggest perks of being a digital nomad or remote worker. But when it comes to taxes, that freedom can get complicated fast. Different states have different rules, and knowing where you “owe” can make or break your financial peace of mind.

In this guide, you’ll learn how state taxes work for remote professionals, what mistakes to avoid, and when it’s smart to call in expert help from a Fort Mill tax consulting firm like Carolina Tax Consulting, your trusted tax preparation consultant for navigating these tricky waters.

Understanding State Residency Rules

The first step to understanding state taxes is determining where you’re considered a resident. Most states define “residency” as where you live for more than 183 days a year or where you maintain a permanent home. However, some states go beyond that—looking at where your driver’s license, voter registration, or family ties are.

If you’re constantly on the move, you might assume you don’t owe taxes anywhere—but that’s not always true. Some states (like California or New York) are notorious for having strict “domicile” rules, meaning they may still consider you a resident even if you’re away for extended periods.

Quick tip: Keep track of where you spend your time. Use apps or spreadsheets to document how long you stay in each state. It’s one of the easiest ways to prove or defend your tax status.

The Double-Tax Dilemma

One of the biggest headaches remote workers face is double taxation—when two states both want to tax your income. For example, if your employer is based in one state but you live or travel in another, both may claim you as a taxpayer.

Thankfully, some states have reciprocal tax agreements, which allow residents to pay income tax only in their home state, even if they work across state lines. Others offer tax credits for taxes paid elsewhere.

If you move frequently or work for clients in multiple states, you may need to file multiple state tax returns. This is where a professional tax adviser can save you time, stress, and potential penalties.

Remote Work and “Nexus” Rules

Here’s a lesser-known tax trap: your physical presence as a worker can create a “nexus” for your employer. In other words, if you’re working remotely from another state, your employer might suddenly be required to withhold taxes or register there.

While this primarily affects companies, it can indirectly affect you if your employer misclassifies your location or fails to adjust your withholdings correctly. This situation often leads to underpayment or incorrect filings—something the IRS and state agencies won’t overlook.

The best solution? Communicate clearly with your employer about where you’re physically working. Accurate records prevent confusion later.

Case Study: The Cross-State Freelancer

Jessica, a freelance web developer, spent six months in Colorado, three in Florida, and the rest of the year visiting family in North Carolina. When tax season came, she wasn’t sure where to file. Her clients were based in three different states, and she received 1099s from each.

A quick consultation with a tax expert revealed that because her domicile remained North Carolina—where she had her driver’s license, mailing address, and bank account—she only needed to file as a North Carolina resident and report her total income there. That single conversation saved her from filing three unnecessary state returns and paying extra.

How to Stay Compliant and Stress-Free

To avoid surprises at tax time:

• Keep detailed travel and income records.
• Research residency and tax rules for every state you work in.
• Track all client payments and 1099 forms.
• Use cloud-based accounting tools to simplify documentation.
• Consult a professional before filing if you’re uncertain.

Being proactive about taxes means fewer headaches and more time to enjoy your nomadic lifestyle.

Final Thoughts

State taxes for digital nomads and remote workers are rarely straightforward—but they’re manageable with the right guidance. Whether you’re freelancing across states or working remotely for a single employer, it pays to understand where you owe taxes before April rolls around.

If you want expert help keeping your returns clean and compliant, reach out to a trusted advisor like Carolina Tax Consulting, a Fort Mill tax consulting firm and tax preparation consultant that helps remote workers minimize tax stress and maximize savings.

Don’t let state tax rules hold back your freedom. Schedule a consultation with Carolina Tax Consulting today to simplify your remote work tax strategy.