So, you’ve untethered yourself from the office. Maybe you’ve packed up your life for a new state—or even a new country. Or perhaps you’re just dipping a toe into the digital nomad lifestyle with a temporary “workation.” The freedom is intoxicating. But here’s the not-so-fun part: your tax situation just got a lot more complicated.
Honestly, it’s a maze. A maze built by different states and countries, all with their own rules about who owes them money. But don’t let that scare you off. Let’s untangle this together, in plain English.
The State Tax Tug-of-War: Where Do You Owe?
Forget international borders for a second. The biggest, most immediate headache for newly remote Americans often happens between states. You might think, “I moved from New York to Florida, so I only pay Florida taxes now.” Well, not necessarily. States like to fight over their piece of the pie.
The Dreaded “Convenience of the Employer” Rule
This is a big one. A handful of states—including New York, Delaware, Nebraska, and Pennsylvania—have what’s called a “convenience of the employer” rule. It’s a doozy.
Here’s the deal: If your company is based in one of these states, but you choose to live and work remotely in another state for your own convenience (not because your employer requires it), the first state can still tax 100% of your income. Your new state will likely want to tax it, too. You might get a credit, but you could still end up with a higher overall tax bill. It’s a raw deal, frankly, and a major pain point for employees fleeing high-tax states.
Establishing Domicile vs. Residency
This is your first line of defense. States will look at everything to see if you’ve truly, permanently left. It’s not just about renting an apartment for a year.
- Change your driver’s license and voter registration. This is non-negotiable.
- Update your mailing address on all bank accounts, credit cards, and with your employer.
- Spend significant time in your new state. If you spend 183 days in a state, you’re almost always considered a resident, but auditors look at a whole “pattern of life.”
- Sever ties with your old state. Sell or rent out your property there. Don’t keep a second home you use frequently.
Think of it like a messy breakup. You need to make it clear to your old state that it’s over. For good.
Taking the Plunge: The International Workation
Okay, let’s talk about taking your laptop to Lisbon or coding from Costa Rica. This is where the complexity gets turned up to eleven.
The 183-Day Rule and Tax Residency
Most countries have a “183-day rule.” Stay for more than 183 days in a tax year, and you’re typically considered a tax resident. This means you could owe income tax to that country on the money you earn while you’re there. But—and it’s a huge but—many countries can consider you a tax resident even if you’re there for a shorter period, especially if you have a “permanent home” or your “center of vital interests” is there. Vague, right?
The Double Taxation Problem
This is the nightmare scenario: both the U.S. and your host country wanting to tax the same income. Thankfully, the U.S. has tax treaties with many countries to prevent this. These treaties determine which country has the primary right to tax your income.
Plus, you can use the Foreign Earned Income Exclusion (FEIE). For 2024, this allows you to exclude up to around $126,500 of your foreign-earned income from U.S. tax. But you have to pass either the “Bona Fide Residence Test” or the “Physical Presence Test,” which involves being outside the U.S. for at least 330 full days in a 12-month period. It’s not a simple vacation.
What About the Company’s Responsibilities?
This isn’t just your problem. Your employer has skin in this game, too. If they have an employee working from a new state or country, they can create something called a “permanent establishment.”
This is a legal term that means the company now has a taxable presence in that jurisdiction. This can trigger corporate income tax, sales tax, and local compliance obligations for them. It’s a massive compliance headache, which is why some companies are hesitant or have strict policies about where you can work.
| Company Concern | Why It Matters |
| Permanent Establishment | Creates corporate tax nexus and filing requirements in a new state/country. |
| Withholding Obligations | Must now withhold state (and possibly foreign) income taxes correctly. |
| Payroll Taxes | Must pay unemployment insurance and other taxes to the new jurisdiction. |
| Local Labor Laws | Must comply with local minimum wage, benefits, and termination laws. |
Practical Steps to Stay Compliant (and Sane)
Feeling overwhelmed? Sure, it’s a lot. But you can navigate this. Here’s a game plan.
- Talk to Your Employer Before You Move. Understand their policy. Will they support you? Will they adjust your pay? This is step zero.
- Track Your Days Meticulously. Get a calendar and log every single day you spend in every state and country. It’s tedious, but it’s your best evidence in an audit.
- Consult a Tax Professional. I can’t stress this enough. This is not a DIY TurboTax situation. Find a CPA or tax advisor who specializes in multi-state or expat tax. The cost is an investment in your peace of mind.
- Research Your Destination. Some countries are rolling out specific “digital nomad visas” that come with clear tax guidelines. Portugal and Croatia, for example, have programs that offer tax benefits for a limited time.
- Keep Impeccable Records. Save lease agreements, utility bills, flight itineraries—everything that proves where you were and when.
The Future is Flexible, But Not Always Free
The world is slowly catching up to this new way of working. But the tax laws? They were built for a different era. They’re playing catch-up, and in the meantime, the burden of compliance falls on you, the remote worker.
That said, the freedom is real. The ability to design a life that isn’t tied to a single zip code is powerful. Just remember that with that great freedom comes… well, a fair amount of paperwork. It’s the price of admission for a borderless career. Plan carefully, get expert help, and you can make it work. The world is your office, after all. Just be sure you know who you’re sending the bill to.