Remote work continues to reshape tax obligations for employees and employers. As of 2026, the IRS maintains that remote workers are generally taxed based on their physical work location, not their employer's address. This means if you live in a different state than your company, you may owe taxes to both states, though credits often offset double taxation.
For home office deductions, the IRS requires the space to be used regularly and exclusively for work. The simplified method allows $5 per square foot up to 300 square feet (max $1,500). Alternatively, the regular method deducts actual expenses like utilities and internet, but requires detailed records.
Employers must also comply with state withholding rules. If an employee works remotely in a state with income tax, the employer typically must register and withhold taxes there. Some states have reciprocity agreements, but not all.
International remote work adds complexity. U.S. citizens working abroad may qualify for the Foreign Earned Income Exclusion (up to $126,500 in 2024, adjusted annually). However, they must meet the physical presence or bona fide residence test. Always consult a tax professional for cross-border situations.
