Connecticut Joins N.J. in Fighting New York Remote-Worker Tax

Connecticut wants to create an incentive for residents to challenge New York’s rules for taxing telecommuters, state officials said Wednesday.

The initiative is included in Gov. Ned Lamont’s (D) proposed budget for fiscal 2025 and was “inspired” by a similar program rolled out in New Jersey last year, said Jeffrey Beckham, the secretary of the Connecticut Office of Policy and Management.

New York requires workers to pay income taxes to the state if their job is based there, even if they work remotely outside of state lines. It’s called the “convenience of the employer” rule because workers must pay New York income taxes if they work elsewhere for their own convenience, not because their employers assign them there.

Criticism of New York’s convenience rule has grown in recent years, with more people working remotely since the Covid-19 pandemic. To keep residents from being double taxed, New Jersey and Connecticut have credited residents for the taxes paid to New York. The Garden State has estimated it’s spent more than $2 billion a year crediting hundreds of thousands of New Jersey residents.

Connecticut wants to encourage residents to challenge “New York’s overreaching tax laws” by offering a tax credit if they’re successful in getting a refund from that state for tax years from 2020 to 2023, Beckham said in a budget briefing. Connecticut taxpayers would get a 50% credit on what they would then owe to the state. If the New York remote-worker tax is challenged successfully, he said, the proposal could generate over $200 million annually.

“It’s a benefit to the resident as well because our taxes are lower than New York, so they’ll have a lower tax liability,” Beckham said.