Multi-State Tax Obligations for Remote Freelancers Working Across State Lines — Nexus

How States Determine Tax Nexus for Freelancers

Multi-state tax nexus for freelancers working remotely is the legal standard that determines which states can tax a freelancer's income based on where work is physically performed, not where the client or business is headquartered. For remote freelancers and 1099 contractors, understanding this concept is essential because working across state lines — even for a few days — can create filing obligations in multiple states, exposing income to taxation beyond the freelancer's home state.

A state establishes tax nexus when a freelancer earns income from work physically performed within its borders, even without a permanent office or business location.¹ The key trigger is physical presence — where the freelancer's body is located when the work happens. This means a freelancer living in Texas who travels to California for a three-day client meeting and performs work while there has likely created nexus in California for those days of income.

The IRS does not regulate state nexus rules. Each state sets its own thresholds, and those thresholds vary widely. Some states, like New York, aggressively assert nexus using "convenience of the employer" rules, which can tax remote workers on income earned while working in the state for an out-of-state employer.² Other states require a minimum number of days worked or a minimum dollar amount of income before nexus is triggered.

Freelancers earning $400 or more in net self-employment income must file Schedule C and pay self-employment tax at the federal level.³ State nexus is a separate determination layered on top of that federal requirement. A freelancer may owe federal self-employment tax but owe nothing to a particular state if they did not work enough days or earn enough income there to meet that state's nexus threshold.

When Remote Work Creates a Tax Home in a Second State

A freelancer's tax home is generally their primary place of business — where they perform most of their work. When a remote freelancer works enough days in a second state, that state may consider the freelancer to have a second tax home there, triggering filing requirements for income earned while present in that state.

More than 1 in 4 paid workdays in the U.S. were done from home in 2024, up from 1 in 14 days pre-pandemic, which has significantly increased multi-state tax exposure for remote workers.⁴ Consider a hypothetical freelancer based in Chicago who spends two weeks per month at a shared workspace in Milwaukee. After several months, Wisconsin may consider that freelancer to have a tax home in the state, requiring a nonresident return for the income earned during those Wisconsin workdays.

The key distinction is between a temporary assignment and a recurring work pattern. A single week working from a vacation rental in another state typically does not create a second tax home. But a regular, predictable pattern of working from a second state — say, every other week for six months — likely does. Freelancers should track not just total days worked in each state but also the frequency and regularity of that work.

The 183-Day Rule and How It Triggers Filing Requirements

Many states use a 183-day threshold as a bright-line test for residency or filing requirements. If a freelancer spends 183 days or more in a state during the tax year, that state may consider them a resident for tax purposes, subjecting all of their income — not just income earned in that state — to taxation.

The 183-day rule is not uniform across all states. Some states count any part of a day as a full day for purposes of the threshold. Others count only days where work was performed. A few states, like New York, use a lower threshold or apply the convenience rule to capture income from remote workers who spend fewer than 183 days in the state.²

For freelancers who split time between states, tracking days is critical. Suppose a freelancer lives in Florida (no state income tax) but spends 200 days per year working from a rented apartment in New York City. Under New York's rules, that freelancer may be considered a resident and owe New York state and city income tax on their entire freelance income, not just the income earned while physically in New York.

State-by-State Nexus Thresholds Every Freelancer Must Track

The District of Columbia and 41 states impose personal income taxes, and nexus thresholds for remote workers range from $1 to over $500,000 in gross receipts.⁵ The table below summarizes the range of thresholds freelancers should be aware of:

Freelancers should check each state's specific threshold before traveling for work. A single day of work in New York City can trigger a filing requirement for the income earned that day. In contrast, a freelancer would need to spend months working in Ohio before nexus is established.

The most aggressive states for nexus enforcement include New York, California, and Oregon. These states have audit programs specifically targeting remote workers and freelancers who may have underreported income earned within their borders.

How to Allocate Income Between Your Home State and Work State

When a freelancer has nexus in multiple states, they must allocate income between their home state and each work state. The general rule is that only income earned while physically present in a given state is taxable by that state. Income earned while working from home is taxable only by the home state.

Allocation is typically done on a days-worked basis. Suppose a freelancer earned $100,000 in total freelance income during the year and worked 240 days total. If 20 of those days were spent working in California, then 20/240 of the income — approximately $8,333 — would be allocated to California and subject to California nonresident tax.¹

Some states use a different allocation method. New York's convenience rule, for example, can allocate income to New York even if the work was performed outside the state, if the work was done for a New York-based client and the freelancer could have performed it in New York.² Freelancers working for New York clients should be especially careful about how they document where work was performed.

Avoiding Double Taxation With Credits and Reciprocity Agreements

Double taxation occurs when two states tax the same income. Most states avoid this by offering a credit for taxes paid to other states. For example, if a freelancer pays tax to California on a portion of their income and also pays tax to their home state on that same income, the home state should provide a credit for the California tax paid, up to the amount of home state tax owed on that income.

Reciprocity agreements between states can also prevent double taxation. For example, Iowa, Kentucky, Michigan, Minnesota, Montana, North Dakota, Ohio, Pennsylvania, Virginia, and Wisconsin have reciprocity agreements with some neighboring states, allowing residents of one state to work in the other without filing a nonresident return.⁶

Freelancers should check whether their home state and work states have reciprocity agreements. If they do, the freelancer may only need to file a return in their home state. If they do not, the freelancer must file a nonresident return in each work state and claim a credit on their home state return for taxes paid to other states.

What Happens When You Work in a State With No Income Tax

Working in a state with no personal income tax — such as Texas, Florida, or Nevada — does not automatically exempt a freelancer from filing obligations in other states. The freelancer's home state may have no income tax, but if they work in a state that does, they still owe tax to that work state on income earned there.

Consider a hypothetical freelancer living in Texas who travels to California for a 10-day project and earns $5,000 during those days. Texas will not tax that income because Texas has no income tax. But California will tax that $5,000 because the work was performed in California. The freelancer must file a California nonresident return and pay California tax on that income.

The reverse is also true. A freelancer living in California who works remotely from a rented apartment in Texas for three months still owes California tax on all income earned during that period, because California taxes its residents on worldwide income regardless of where the work is performed. The freelancer cannot avoid California tax simply by working from a no-tax state.

Tracking Days and Income Across State Lines Without Losing Your Mind

Tracking workdays and income by state is the single most important habit a multi-state freelancer can develop. Without accurate records, the freelancer cannot properly allocate income, claim credits, or defend their filing positions in an audit.

A simple spreadsheet with columns for date, client, state worked, hours worked, and income earned is sufficient for most freelancers. More sophisticated options include time-tracking apps that log location data or project management tools that record where work was performed. The key is consistency — record every workday, not just the ones that seem important.

Estimated quarterly tax payments are due April 15, June 15, September 15, and January 15, with penalties applying if withholdings fall below 100% of prior year tax liability (110% if AGI exceeds $150,000).⁷ Freelancers with multi-state obligations should factor state tax payments into their quarterly estimates, not just federal self-employment tax.

Your Next Step

Open a spreadsheet and list every state you worked in during the current tax year, the number of days worked in each state, and the income earned during those days. Then check each state's nexus threshold using the state's department of revenue website. If any state's threshold is met, prepare to file a nonresident return for that state. For freelancers with complex multi-state situations, PreFileCheck's multi-state tax review can identify filing obligations across all states and help allocate income correctly before the filing deadline.