Income Tax Withholding Requirements by State

Author: Brightmine Editorial Team

Employers in all states (except states those that do not have an income tax - Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) are required to withhold state income taxes from their employees' pay. Employees who live and work in the same state in which their employer is located are subject to income tax withholding for that one state, unless they claim an exemption from withholding.

However, withholding is not as simple when a resident performs work for the employer in another state, or when a nonresident performs work in the employer's state or works fully remotely for the employer from another state. The income tax law of the employer's state may or may not require withholding for such employees for their state of residence and/or their work state, even if the employer's state does not impose an income tax. In addition, an employer must consider whether reciprocal agreements with other states and/or nonresident exemptions apply and affect withholding.

An employer that fails to properly withhold income taxes may be subject to costly noncompliance penalties and fines and may have to make time-consuming payroll corrections. The following chart will help multistate employers correctly withhold state income taxes for resident and nonresident employees no matter where they work, even if remotely.

For purposes of this chart, N/A means that the state does not have an income tax and, therefore, also has no reciprocal agreements or nonresident exemptions. The term Jurisdiction refers to the state(s) in which an employer has business operations.

The following additional information is available on HR & Compliance Center:

• Withholding exemptions provided by each state for military employees and nonresident military spouses;
• How to Determine State Income Tax Withholding for Nonresident Employees;
• How to Determine State Income Tax Withholding for Employees Who Work in More Than One State; and
• Determine State Income Tax Nexus for Telecommuters Checklist