Federal tax works the same no matter where you live. State tax does not. Remote work has made it common for a freelancer in one state to bill clients across the country, spend weeks working from somewhere else, or move partway through the year, and each of those situations raises the same question: which state gets to tax the income?
The answer usually depends less on where your clients are and more on where you live and where you physically do the work.
Your home state generally taxes all your income
If you are a resident of a state with an income tax, that state generally taxes all your income, wherever it was earned. A designer living in one state who works entirely for clients based elsewhere usually owes income tax only to their home state. Where the client is located generally does not, by itself, create a tax obligation in the client's state for an individual freelancer.
Working while physically in another state
Things get more complicated when you physically perform work in another state, for example by spending a month on a client project on-site or working remotely from a second home. Many states tax nonresidents on income earned from work done inside their borders, and filing thresholds vary widely. Some trigger a filing requirement after only a small amount of in-state income or a few days of work.
Credits prevent most double taxation
When two states both tax the same income, your home state usually gives you a credit for tax paid to the other state. You generally still have to file a nonresident return in the work state and then claim the credit on your resident return. The result is usually that you pay roughly the higher of the two states' rates, not both added together.
Moving partway through the year
If you move from one state to another, you typically file a part-year resident return in each state. Each state taxes the income you earned while you lived there. Keeping clear records of your move date, and of when each payment was earned, makes splitting the income much easier.
States without income tax change the math
A handful of states do not tax wage or self-employment income at all. Living in one can lower your total tax bill meaningfully, but it does not protect you from tax in other states where you physically work. State taxes are also only one piece of the picture, since self-employment tax and federal income tax stay the same everywhere. Our calculators are templated by state, so you can compare your estimated total bill in each state you are considering.
This article is for general education only and is not tax or legal advice. Tax rules vary by jurisdiction, change over time, and depend on your specific situation. Talk to a qualified tax professional before making filing or payment decisions.