Working From Home in a Different State

[jvramirez13]

So, I have lived in Virginia my whole life and went to college there. Before graduating, I got a job at a company in Northern Virginia that starts in September. However, I have family in California and I am currently living with them for now riding out this pandemic.

I got an email from my employer a few days ago that they will be doing optional work from home until the end of 2020. If I decide to stay in California until the end of 2020 and work here and then go back to Virginia in the beginning of 2021, which state tax do I pay? California or Virginia?

Thank you!

[TomD8]

Since your home state to which you intend to return is Virginia, and you are in California for a transient or temporary purpose only, for state tax purposes you are a resident of Virginia and a non-resident of California.

Residents of VA are taxed on ALL their income, regardless of its source.  Therefore your income in CA is taxable by VA.

Non-residents of CA are subject to CA taxation on their CA-source income.  Income you earn by actually working in CA is CA-source income.  Therefore your income in CA is also taxable by CA. 

So you will have to file a non-resident CA tax return in addition to your home state VA tax return.

CA and VA are "reverse-credit" states*.  That means that you may take a credit on your CA return for the taxes you pay to VA on the same income, so you won't be double-taxed.

*Normally in these situations the resident state allows a credit for taxes paid to the non-resident state. In the case of CA and VA, it is the non-resident state that allows the credit.  Hence the term "reverse credit".