New York’s Convenience of the Employer Rule: Do Remote Workers Outside NY Still Owe NY Tax? (2026)

Live in New Jersey or Connecticut, keep a desk at a Manhattan office, and work from home a few days a week: it is a common arrangement for Japanese expats and local hires in the New York area. The natural question is whether the days you work at home in New Jersey are really New York income.

New York answers with its “convenience of the employer” rule. In general, when a nonresident whose primary office is in New York works from home outside the state for their own convenience, those days are treated as days worked in New York. This article explains the rule, the “bona fide employer office” exception, how days are allocated on Form IT-203-B, and how New Jersey and Connecticut respond, based on official state guidance.

For the bigger picture of moving to a no-income-tax state and working remotely, see Moving to Texas or Florida (0% State Income Tax). This article focuses on how the calculation works on the New York return.

Key points

• A nonresident working for a New York employer can treat days as out-of-state only when the employer’s necessity requires the work to be done outside New York. Days worked at home for the employee’s convenience are generally New York days.
• The exceptions: your home office qualifies as a bona fide employer office, or your assigned or primary work location is an employer office outside New York.
• Days are allocated on Schedule A of Form IT-203-B, which lists home days separately and adds them back as New York days.
• Since tax year 2023, New Jersey applies a matching rule to residents of states with a similar test, including New York (P.L.2023, c.125). Connecticut’s rule is also reciprocal.
• Connecticut’s resident credit (Schedule 2) covers wages earned at a Connecticut home office that New York taxes under its convenience rule. New Jersey’s credit is capped at the lesser of the New Jersey tax on that income or the tax actually paid to the other state.

What the convenience of the employer rule says

Nonresidents pay New York tax only on New York-source income, and wages earned partly inside and partly outside the state are normally allocated by days worked. The Form IT-203 instructions, however, say any allowance for days worked outside New York must be based on services that, because of the employer’s necessity (not convenience), obligate the employee to out-of-state duties, meaning duties that by their nature cannot be performed at the employer’s place of business. The rule comes from the state’s regulations at 20 NYCRR 132.18(a).

Situation	How the day is treated
Working at the New York office	New York day
Primary office in New York; normal work day at home outside the state	New York day
Same, but the home office is a bona fide employer office	Out-of-state day
Primary work location is an employer office outside New York; normal work day at home	Out-of-state day
Out-of-state work required by the employer (duties that cannot be done at the New York office)	Out-of-state day
Working at home on a day that is not a normal work day (e.g., a weekend)	Nonworking day

The tax department’s FAQ says the same about telecommuting: if your primary office is in New York, your telecommuting days are New York days unless your employer has established a bona fide employer office at your telecommuting location, and unless the employer specifically acted to do so, you will continue to owe New York tax on that income.

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The exception: the bona fide employer office test

If your home office is a bona fide employer office, normal work days there count as days outside New York. The test is set out in technical memorandum TSB-M-06(5)I (May 15, 2006). The home office must meet either:

• (a) the primary factor: the home office contains or is near specialized facilities needed for the job that cannot be provided at the employer’s place of business; or
• (b) at least 4 of 6 secondary factors and at least 3 of 10 other factors.

The six secondary factors:

1. The home office is a requirement or condition of employment.
2. The employer has a bona fide business purpose for the home office location.
3. The employee performs some core duties at the home office.
4. The employee meets clients, patients or customers there on a regular and continuous basis.
5. The employer does not provide designated office space or regular work accommodations at one of its regular places of business.
6. The employer reimburses expenses for the home office.

The other factors include a separate phone line and listing maintained by the employer, the home office address and phone number on the employer’s letterhead or business cards, and a specific area of the home used exclusively for the employer’s business.

If you have a desk at the New York office and work from home because you prefer to or because of a flexible-work policy, meeting this test is not easy. Ask HR or payroll whether the company has considered bona fide employer office treatment.

Allocating days on Form IT-203-B

Nonresidents and part-year residents file Form IT-203 and allocate wages earned inside and outside New York on Schedule A of Form IT-203-B, one schedule per job (and per spouse if both have allocable wages).

Line	What goes there
1a	Total days employed at the job during the nonresident period (365 for a full year)
1b-1f	Nonworking days: weekends, holidays, sick leave, vacation, other
1g	Total nonworking days
1h	Total days worked (1a minus 1g)
1i	Days included in 1h worked outside New York
1j	Days worked at home included in 1i
1k	1i minus 1j
1l	Days worked in New York (1h minus 1k)
1n	1l divided by 1h, rounded to four decimals
1o-1p	Wages to allocate, and New York wages (1n x 1o)

Because line 1j subtracts home days back out of the out-of-state total, the form treats home days as New York days. If you qualify for an exception such as a bona fide employer office, check the current IT-203 instructions and TSB-M-06(5)I on how to report it, and keep your supporting documents.

New York computes a nonresident’s tax as if they were a full-year resident and then applies the ratio of New York-source income to total income (per the tax department’s FAQ). More New York days mean a higher ratio and more tax.

Example: a New Jersey resident working in Manhattan

Example: B lives in New Jersey all year, her primary office is in Manhattan, and her 2025 salary is $150,000. Assume 365 days, 132 nonworking days (104 weekend days, 10 holidays, 15 vacation days, 3 sick days) and 233 days worked: 130 at the Manhattan office, 93 at home in New Jersey by her own choice, and 10 at a client site in another state at her employer’s direction.

	Home days under the convenience rule	Home office is a bona fide employer office
Days worked	233	233
93 home days	New York days	Out-of-state days
10 client-site days	Out-of-state days	Out-of-state days
New York days	223	130
Allocation ratio	223 / 233 = 0.9571	130 / 233 = 0.5579
Wages allocated to New York	$150,000 x 0.9571 = $143,565	$150,000 x 0.5579 = $83,685

The difference is $59,880 of New York-source wages from the same work pattern. As a New Jersey resident, B reports all her income to New Jersey and calculates the New Jersey credit for tax paid to New York.

New Jersey and Connecticut

New Jersey

• New Jersey residents claim a credit for income taxed by both New Jersey and another jurisdiction on Schedule NJ-COJ. Per publication GIT-3W, the credit is the lesser of the New Jersey tax that would apply if the income were earned in New Jersey or the tax actually paid to the other jurisdiction.
• P.L.2023, c.125, enacted July 21, 2023 and retroactive to January 1, 2023, applies a convenience rule to nonresidents from states with a similar test, such as New York, who work remotely for a New Jersey employer. It does not apply to Pennsylvania residents because of the reciprocal agreement.
• New Jersey also offers a refundable credit for tax years 2020 through 2023 to residents who were taxed by another state on income earned while working remotely in New Jersey, won a final judgment in that state’s tax court or tribunal, and received a refund. The credit equals 50% of the additional New Jersey tax that results.

Connecticut

• Connecticut has its own convenience rule (Conn. Gen. Stat. § 12-711(b)(2)(C)), but it applies only when the nonresident’s home state uses a similar test, according to Connecticut’s Office of Legislative Research and the New Jersey Division of Taxation.
• The 2025 Form CT-1040 instructions list, as income eligible for the Schedule 2 credit, compensation for services performed from a home office in Connecticut for an employer in a jurisdiction that applies a convenience of the employer test. The Office of Legislative Research says Connecticut has allowed this credit since 2019.

In the other direction, New York residents taxed by another state use the New York resident credit (Form IT-112-R).

Points for Japanese expats and returnees

• Keeping a New York desk while working from a New Jersey or Connecticut home generally increases your New York days. Heavier New York withholding is not necessarily a mistake.
• Days worked during trips to Japan or elsewhere turn on whether the employer required the work there or it was your own choice. Keep calendars, travel orders and badge records throughout the year.
• If you keep working remotely for a New York employer after moving back to Japan, how New York treats that income as a nonresident can become an issue, and Japan will tax you as a resident too. Check both sides before you agree on the arrangement.
• Employers may also need to withhold or register in the employee’s home state (see related articles).

FAQ

Do weekend days worked at home count as New York days?

No. Work at home on a day that is not a normal work day is treated as a nonworking day under the IT-203 instructions.

My primary office is in New Jersey, and I visit the New York headquarters sometimes.

If your assigned or primary work location is an employer office outside New York, normal work days at home are out-of-state days. Days you actually work at the New York headquarters are New York days. Confirm your primary location from your employment terms and actual assignment.

Does a dedicated home office make it a bona fide employer office?

Not by itself. Exclusive business space is just one of the other factors. Without the primary factor, you need at least four secondary factors and three other factors.

I live in New Jersey and paid New York tax. Am I taxed twice?

New Jersey residents calculate the credit on Schedule NJ-COJ, but it is capped, and how much of your home-day wages it covers depends on your facts. New Jersey also has the refundable credit for 2020 through 2023 for residents who won a challenge to another state’s tax.

At CLT NY INC., an IRS Enrolled Agent can help with New York, New Jersey and Connecticut nonresident and part-year returns, home-day allocations and credits for taxes paid to other states, in English or Japanese. Contact us.

Need help with your U.S. tax return? CLT NY INC. is run by an IRS Enrolled Agent and prepares individual returns (Form 1040, Form 1040-NR and state returns) in English or Japanese. All fees are published on our U.S. individual tax return service page, and the quote, payment, documents and progress are all handled in our own app.

Related articles

• Moving to Texas or Florida (0% State Income Tax)! Remote Work Taxes & Double Taxation Risks
• Navigating the Strict State Taxes of New York and California: Residency Risks for Individuals Returning to Japan
• State Tax Filing and Out-of-State Sourced Income: Navigating Complex Rules
• The Ultimate Guide to Out-of-State Employer Registration (SUI/SIT) in the Remote Work Era
• States with No State Income Tax & Tax Considerations for Moving Within the U.S.: A Comprehensive Guide
• Local Income Taxes in the U.S.: New York City, Yonkers and Other City Income Taxes Explained (2026)

Sources: Instructions for Form IT-203 (2025); Form IT-203-B (2025); TSB-M-06(5)I; NYS Department of Taxation and Finance, FAQs on filing requirements, residency and telecommuting; NJ Division of Taxation, Convenience of the Employer Sourcing Rule; NJ Division of Taxation, Convenience Rule FAQ; NJ Treasury press release, October 8, 2024; NJ Division of Taxation, GIT-3W; CT DRS, 2025 Form CT-1040 Instructions; CT Office of Legislative Research, Convenience of the Employer Rule (2025-R-0067). Information as of October 2026. This article provides general information and is not individual tax advice.