The basic rule: work where you earn
Most states tax wages where the work is physically performed. If you live in Colorado and work remotely for a New York employer, Colorado generally taxes the wages because the work happened in Colorado. Some states (New York, Pennsylvania, Delaware, Nebraska, Connecticut) apply a 'convenience of the employer' rule — they tax remote work for in-state employers as if it happened in their state, creating double-tax exposure.
Resident vs. nonresident vs. part-year
A resident return reports all your worldwide income to your home state (with credits for tax paid to other states). A nonresident return reports only the income earned in that state — typically wages physically earned there or property income there. A part-year return splits the year by date of move. If you moved in 2025, expect two state returns: one part-year resident return for each state.
How state credits prevent double tax
Your resident state allows a credit for income tax paid to another state on income that both tax. The mechanics matter: you compute the nonresident return first, then apply the resulting tax as a credit on the resident return. Software handles this when pointed at the returns in the right order; manual prep often gets it wrong.
Reciprocity agreements
Some neighboring states have reciprocity — residents are taxed only by their home state on wages even when working across the border. Examples: Pennsylvania-New Jersey, Illinois-Iowa, Maryland-Virginia. If you live in one and work in the other, file a non-resident exemption form with your employer to stop withholding.
Things people miss
Remote-work bonuses paid after a move are often allocated to the state where the work that earned them occurred. RSU vests can have multi-state allocation based on grant-to-vest workdays. Per-diem and travel allowances can be partially taxable. State unemployment and disability obligations can stick to old states for a while. If you moved this year, share dates and pay stubs — getting this right keeps you out of mismatched-W-2 letters from state agencies.