Remote working

[Kana]

I am working for a place in Massachusetts remotely from home in Maine.

1. Where do I file state taxes?

2. What happens if I rent out the house in Maine and move to another state that does not have income tax such as New Hampshire?

3. Would it be the easiest to rent out the house in Maine and move back to Mass (I'm from there)?

Thank you.

[RaifH]

It depends if you are telecommuting due to a pandemic-related circumstance. You always pay tax to your resident state, which currently sounds like it is Maine. According to a directive released by Massachusetts, "employees filing a 2020 Massachusetts non-resident tax return who worked in Massachusetts prior to the Massachusetts COVID-19 state of emergency and who later telecommuted from locations outside Massachusetts due to a Pandemic-Related Circumstance must continue to source their wages earned from such subsequent employment to Massachusetts." This remains true until September 13, 2021.

So if you would have physically worked in Massachusetts if not for the fact that the pandemic shut everything down, your income would be taxable by Massachusetts until September 13, 2021. If you would have telecommuted even if there was no pandemic and never reported to your Massachusetts office, then it is not taxable by Massachusetts and you only have to pay Maine tax. 

If you became a resident of New Hampshire, your wages would not be taxed by any state. You would potentially have to pay Maine tax on renting out your home. 

If you determine that you do owe Massachusetts taxes because you were reporting to a Massachusetts office prior to the pandemic, you would receive a credit on your Maine tax return for the taxes paid to Massachusetts. You would only allocate the portion of your wages you earned until September 13 to Massachusetts and report this income on a nonresident Massachusetts tax return. After that, the temporary Massachusetts directive expired and your income is only taxable by your resident state. 

If you are a full-time telecommuter from out-of-state, it is not that difficult to file the state taxes as long as you and your employer are on the same page. For the most part, your employer needs to be pulling out the taxes for your resident state, not the state in which the employer is based. It becomes more difficult if you do have to go to Massachusetts on occasion for work. In that case, your wages may have to be allocated between what is earned in your resident state and your work state. Obviously, if your work state and resident state are the same, it eliminates that problem. 

[Kana]

No I was not working prior to pandemic in Massachusetts. This job started this year and it is fully remote. 

I remember having colleagues that lived in New Hampshire while working at the naval base in Maine back in 2017 and they were complaining that they have to file tax return to Maine cause of work even though they live in New Hampshire. It didn't bother me at all cause my residence was in Maine. But this time, it is me that need to figure this out. 

What should I tell my employer or payroll office to make this easier? And it seems like renting this place is just another hassle (I just tried to calculate taxes and whatnot, and nah I love calculus, not this tax stuff). 

[JohnB5677]

It sounds like you do work 100% remotely, so you will pay taxes in the state that you work in, and right now that is Maine.

Your colleagues were right and the same rule above applies.  You pay tax in the state you work in and that income also goes to your home state (if they have income tax) and you get a tax credit from the work state.

Let your employer know where you're going to be living.  If you stay in Maine, have them withhold Maine taxes.  If renting in Maine is a hassle you can move to Hew Hampshire and not have to have any tax withheld.