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The “convenience of the employer” rule applies when an employee works remotely in a state different from their employer’s office location Learn about state, federal, and international tax rules, the “convenience of the employer” rule, and best practices for compliance. States like new york, pennsylvania, and nebraska enforce this rule, taxing income based on the employer’s location unless remote work is mandated by the employer.

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Normally, employees working for a company based in another state would only be subject to income taxes where they live How do taxes work for remote employees in 2025 However, under the convenience of the employer rule, employees residing in a different state from their employer’s location may have to pay taxes in both states.

At least seven states (alabama, connecticut, delaware, nebraska, new jersey, new york, and pennsylvania) apply the convenience rule.

However, there are two major exceptions to this rule States that have reciprocal tax agreements with one another and the convenience of the employer rule When states have reciprocity arrangements with one another, you only need to pay taxes on the related wage income to your state of residence. It means you're taxed as if you work in your employer's state even if you don't

You may need to file both a resident and a nonresident return, unless you live in a reciprocal state or a state without income tax. A notable exception is the “convenience of the employer” rule Under this rule, if an employee works remotely for their own convenience rather than as a requirement of the employer, they may owe income tax to the employer’s state. The new rule applies to those employees who work in other states which also impose convenience of the employer rules

Those states are connecticut, delaware, nebraska, new york, and pennsylvania.

Which states have the convenience of the employer rule Right now, only five states are using the convenience of the employee rule Arkansas delaware nebraska new york pennsylvania connecticut, massachusetts, and new jersey also have a version of the rule. Under this rule, if an employee works remotely out of personal convenience rather than out of necessity for the employer, their income is sourced to the employer’s state.