I currently live and work in New York City. My company is based in New York City. So, my income tax situation is pretty straightforward: I pay federal taxes and New York taxes.
I am planning to permanently relocate to the Washington, DC metro area. I will be working for the same company and telecommuting, with occasional trips to New York (perhaps twice a year for a week at a time).
I have two questions:
1. How will my income tax situation change? Will I need to pay taxes to both New York and to my new state?
2. I have not decided where exactly to live yet. Would one state be better than another from a tax perspective? (My choices are Maryland, Virginia, and DC itself). I will be renting so I'm not concerned about property taxes etc. I'm really just asking about income tax here.
Thank you in advance for your help.
If you work from home, for your convenience (and it sounds like that's the case) you are subject to NY tax. Your employer is most likely aware of this rule and will withhold NY tax.
Telecommuting. If you work outside the state as a job requirement, you are only subject to New York State income tax on the days you work in New York. But if you work outside New York for your own convenience, you are subject to New York State income tax on all your income. Pennsylvania, Nebraska, Delaware and New Jersey have the same rule. For guidance see: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html
Here's a link to New York's memorandum on its "convenience of the employer" tax doctrine regarding non-resident telecommuters: https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf
<<"Would one state be better than another from a tax perspective? (My choices are Maryland, Virginia, and DC itself).">>
Maryland has a state income tax rate of 5.75%. Cities and counties level an additional local income tax ranging from 1.75% to 3.20%.
DC has a graduated income tax rate ranging from 4.0 to 8.95%.
Virginia has a state income tax rate of 5.75%.