Are You a Multistate Resident? Protect Yourself from Double Taxation
Many people mistakenly believe that U.S. law protects them from being taxed by more than one state on the same income. The reality is far more concerning: neither the U.S. Constitution nor federal law prevents multiple states from imposing income tax on the same earnings. This means your hard-earned income could be at risk. While some states offer tax credits to help avoid double taxation, these safeguards are far from guaranteed. If you maintain residences in more than one state, understanding your risks and taking action is not just wise—it’s essential to protect your financial well-being.
Domicile compared to Residence
If you are “domiciled” in a state, you are subject to that state’s income tax on your worldwide income—regardless of where you spend most of your time. Domicile is defined as your “true, fixed, permanent home,” the place to which you intend to return whenever you are away. Critically, your domicile does not change—even if you spend minimal time there—until you take deliberate, documented steps to establish domicile elsewhere. Failing to proactively manage your domicile status can lead to unexpected tax bills and costly disputes.
Residency is determined by the amount of time you spend in a state. Typically, you are considered a resident if you maintain a “permanent place of abode” and spend a threshold number of days—often at least 183 days per year—in that state. Many states aggressively tax residents on their worldwide income, regardless of where their official domicile may be. If you are not vigilant in tracking your days and managing your ties to each state, you could easily find yourself facing tax liability in more than one jurisdiction.
Remote Work
Most states now aggressively tax remote workers who provide services for companies within their borders—even when those workers never physically set foot in the state. For example, if you live in Florida (which has no state income tax) but work remotely for a New Jersey-based employer, that employer must withhold New Jersey income tax from your wages. This means you are required to file a Non-Resident Income Tax Return and pay New Jersey taxes, potentially erasing the tax advantages of living in a no-tax state.
The situation becomes even more alarming if you live in a high-income-tax state like Hawaii (with a top rate of 11%) and work remotely for a New Jersey employer. In this scenario, you could be subject to both New Jersey and Hawaii state income taxes, with a combined rate exceeding 20%.
Without careful planning, you could lose a significant portion of your income to double taxation—a costly mistake that can and should be avoided.
Potential Solution
Consider another example: You live in State A but work in State B. Due to a long commute, you maintain an apartment in State B near your office and return home to State A only on weekends.
State A taxes you as a domiciliary, while State B considers you a resident and taxes you as well. If neither state offers a credit for taxes paid to the other, your income is taxed twice—potentially devastating your finances. This double taxation is not just a bureaucratic inconvenience; it is a real threat to your wealth and financial security.
To protect yourself from double taxation, one powerful strategy is to avoid maintaining a permanent place of abode in State B. While State B may still tax income earned from work performed there, it generally cannot reach income from other sources, such as investments located in State A. Proactive planning like this can make the difference between safeguarding your income and paying unnecessary taxes.
Minimize Unnecessary Taxes
This example highlights just one way double taxation can surprise individuals who divide their time between multiple states. Because state tax laws vary and are highly fact-specific, expert guidance is not just helpful—it is indispensable. I aggressively advocate for my clients, thoroughly researching applicable state laws and developing customized strategies that protect their wealth and minimize unnecessary tax exposure. Take action now to ensure you are not paying more than you have to pay.
Please call me at (856) 665-2121.
RJC
May 3, 2026
