Self employment income from another state

[rjonthomas]

I have self employment income from a client that is located in another state. Some of it was earned from work at the client's location, some of it from work at my home office. Do I need to file a tax return for that other state?

[DaveF1006]

It depends on that other state. Most states tax non-residents on income earned while physically present in their state.  Some states (like California, New York, and Illinois) are more aggressive. They use "Market-Based Sourcing," which argues that if the benefit of your service is received in their state, the income is taxable there—even if you never left your home office.

If your client is in a market-based state, they may treat all income from that client as taxable in their state. Check the thresholds—many states have “de minimis” rules. If you earned only a small amount, like under $2,000 or $5,000, you might not need to file a return there at all.

[rjonthomas]

Thank you. The 1099 I received from them listed all the income they paid me, whether I was there or at home. The state is New York. I'll assume I need to file with NY State. 

[DaveF1006]

Yes, you will need to file a New York State return unless your income falls within the filing threshold limit. For NYS, the 2025 standard deduction amounts are 

1. Single (cannot be claimed as a dependent): $8,000
2. Married Filing Jointly: $16,050
3. Married Filing Separately: $8,000
4. Head of Household: $11,200

If your income exceed those amounts according to your filing status, then you need to file a New York State return.

New York will only tax income earned while working in New York (unless it's Market-Based Sourcing) and there will be allocation screens in your New York State return that will allow you to allocate income earned while working in NYS. 

There is a catch however. New York uses Market-Based Sourcing for service providers. This means NY looks at where the benefit of the service is received.

If you are a consultant and your client is using your work to run their New York-based business, NY law argues that the "market" is in New York, and therefore the income is taxable there—regardless of where you were sitting when you did the work. This is what I was referring to in my original answer when I mentioned Market-Based Sourcing.

[rjonthomas]

My taxable income is under the threshold for married, filing jointly, so I guess I don't need to file.

Thank you for your help.