Working remotely in VT as non resident - how to allocate wages

[Allthethings]

Here's my situation:

Spouse's mother has property in VT though spouse and I are residents of another state (NJ). In 2023, MIL had Internet installed at the property so that spouse and I could occasionally work remotely at the VT house. It was generally 1-2 weeks at a time, perhaps adding up to around a month in the state. My spouse would work, more often than not, only part of the work week while we were up whereas I worked the full weeks, even a Sunday as overtime in one instance.

Spouse's and my employers are not in VT, they only withheld NJ income tax (well, for one paycheck, my job withheld CT income tax since they consider the CT office my work location even though I'm 100% remote and it took a bit to convince HR they need not withhold CT taxes from me), so I'm anticipating we'll be owing VT tax.

What I want to know is how to allocate the income appropriately. I know that NY has a way of doing it where you take a fraction with numerator being the number of days you worked in NY and denominator being the number of days you worked everywhere and then you multiply that fraction against your wages and the deductions as applicable (like 401k, HSA, health insurance premiums). I believe the NY instructions say that each spouse has to calculate their portion of income individually even if they file jointly. Is that how it's done in VT as well or do I take my (and spouse's) actual earnings for the time I spent in the state? We didn't start working remotely until well into the year and our last paycheck that included 2023 time in VT was certainly before the new year, so no VT sourced income yet in 2024. The instructions on the 2022 Schedule IN-113 I looked at as a reference didn't seem to spell it out in the great detail that NY does. (FWIW, I was also looking at the NY forms since spouse and I *also* worked 1 day each in 2023 in NY when we visited my mother. Well, spouse only did a half day there since it was supposed to be a day off.)

[tagteam]

I'll page @Critter-3 

[TomD8]

Since NJ is your resident state, ALL your income is taxable by NJ, regardless of its source.

In addition, VT can tax you as a non-resident on any VT-sourced income.  Work income is sourced where the work is actually (physically) performed.  Thus you have to determine what percentage of your income was earned in Vermont.  This would typically be determined by dividing the number of workdays in Vermont by the total workdays in the year, and then applying that percentage to your total income for the year.  For instance, if you worked 250 days in the year, 25 of which were in VT, then 10% of your income would be VT-sourced.

This reference has detailed info on VT's filing requirements for non-residents, and on the definition of "Vermont-sourced" income:

https://tax.vermont.gov/individuals/who-should-file/nonresident

The same principles would apply to work done in NY, or in any other non-resident state with an income tax.

Your resident state will give you a credit for the taxes paid to a non-resident state on the dollars taxed by both, so you won't be double-taxed.  In TurboTax, be sure to complete the non-resident return(s) before you do your home state return, so that the program can correctly calculate and apply the credit.

[Allthethings]

Thanks for the reply, @TomD8 ! Yes, I'm aware NJ will tax all of my income, but WHERE I can find the exact guidance on how to calculate the VT percentage of my income as I don't see this spelled out in the Schedule IN 113 instructions. Is there a separate worksheet for this and do I figure out for each spouse individually even if we ultimately file jointly? The number of days I worked in VT as a percentage of the days I worked everywhere is different than the number of days my spouse worked as a percentage of the days my spouse worked everywhere.

I know the forms for NY have you do it separately for each spouse and employer (thankfully we each only had one employer in 2023), so while for NY, we each worked 1 day in the state, the total number of days we worked everywhere in 2023 are different. So I'm not worries about substantiating my NY claim. Just want to know where VT provides the same guidance.

[TomD8]

Like you, I can't find any VT guidance on allocation methods.  In the absence of specific guidance, my advice would be to use whatever allocation method makes sense to you, and that you could reasonably support if audited.  

[Hal_Al]

Q.  Just want to know where VT provides the same guidance.
A. They don't, nor do most other states.

Note that @TomD8 's suggested method is essentially the same a NY's.  And, that's usually the answer to that question, in this forum.  You want to identify "VT source income".  It's what you got paid for the day you actually worked in VT.

Here's an interesting article on that general subject.  You pay tax to VT and take a credit on your NJ return. It usually comes out even for you, except for the hassle and expense of of filing a 2nd state return. 

http://money.cnn.com/2013/06/28/pf/taxes/business-traveler-tax-threat/