Remote Work Tax Traps for Executives: Avoid These 3 Costly Mistakes

Where you work from matters more than you think.

Hybrid and remote work didn’t rewrite the tax code—and that’s the problem. If your payroll is tied to one state, your desk is in another, and your equity vests span multiple locations, you can accidentally trigger double-tax exposure, miss easy city refunds, and mis-source big RSU/option events. This guide shows you the exact pitfalls and the fixes.

The three traps hitting executives most

1) Convenience-of-the-Employer rules (NY/NJ/PA)

States like New York can treat your home-office days as worked in New York unless your employer requires you to work remotely or you meet a strict “bona fide employer office” test. New Jersey and Pennsylvania have related approaches that can also bite executives on hybrid schedules.

Fix: Get your assignment location in writing. If you’re required to WFH (not just allowed), keep that documentation. One letter can be the difference between a clean return and a five-figure assessment.

2) Local wage taxes & city rules (Philadelphia)

Philadelphia does not tax nonresidents for days they were required to work outside the city—but it does tax days you chose to WFH for convenience. Track required out-of-city days and file for refunds when applicable.

3) Equity income allocation across states (RSUs/options)

RSU vests and option exercises are typically allocated based on where you worked during the grant-to-vest or grant-to-exercise period. Moving to a zero-tax state before a vest rarely eliminates tax from the prior state’s share.

Go deeper: Align RSU sales and diversification with a rules-based plan:
RSU vests.

What changed for 2025 (fast scan)

• Nebraska: Adjusted parts of its convenience framework and safe harbors (2025).
• Washington: Capital gains excise now tiered—higher rate above $1M in gains for residents.
• Foreign Earned Income Exclusion: Increased to $130,000 (2025) for qualifying workers abroad.

State-by-state quick reference

Equity compensation quick guide

• RSUs: Vesting = wage income allocated by workdays grant→vest. Plan diversification via a selling plan:
  RSU vests.
• NSOs: Exercise = wage income allocated grant→exercise; multi-state service means multi-state tax.
• ISOs: Meet holding periods to avoid wage income; AMT may apply—see
  ISO holding-period strategy.

Working abroad? Don’t forget residency

FEIE may exclude up to $130,000 (2025), but high-tax states (e.g., CA) can still treat you as a resident unless you break domicile ties. Review SALT residency cleanup steps here:
residency file cleanup.

Year-end action plan (do this now)

• Get an assignment letter confirming required work location (NY/NJ/PA risk).
• Track every workday by location; store with equity grant records.
• Philadelphia: adjust wage-tax withholding for required out-of-city days; consider refunds for prior years.
• PA residents: confirm resident credits (limits apply on PA-source income).
• CA movers: complete residency cleanup tasks before filing as a former resident.
• WA residents with large equity: model capital-gains excise at 2025 tiers pre-sale.
• Home office: use employer accountable plans; don’t rely on suspended employee deductions.

Key takeaways

• Documentation beats assumptions: assignment letters + workday logs prevent expensive re-sourcing.
• City wage taxes are nuanced—Philly often allows refunds for required out-of-city days.
• RSUs/options are allocated across states; moving late rarely eliminates tax—plan vests ahead of time.
• If markets rise, use appreciated shares for impact:
  donor-advised funds.
• Taxes are a top lifetime expense—design around them, don’t react:
  see why taxes loom largest.

FAQ

Does New York really tax me even if I never go to the office?

It can. Under the convenience rule, wages may be sourced to New York unless you meet bona fide employer-office criteria or are required to work remotely. Get it in writing.

How do Philadelphia wage-tax refunds work for hybrid schedules?

Nonresidents can seek refunds for days they were required to work outside the city. Days you chose to WFH are typically taxable. Keep a day-by-day location log and employer letters.

What happens to my RSUs if I move from CA to TX before they vest?

States use day-count allocation. California can tax the portion of the vest tied to CA workdays during the grant-to-vest period—even if you vest in Texas. Plan diversification with a selling plan:
RSU vests.

I’m going abroad—does FEIE solve my state tax problems?

FEIE helps federally, but states like CA can still claim residency unless you sever ties. Review a SALT cleanup:
residency file cleanup.

How does Tailored Wealth help with this?

We map your workdays to equity timelines, design 10b5-1/RSU selling plans around state rules, and maintain a simple documentation stack so sourcing, refunds, and residency claims stand up to scrutiny. We also align giving strategies (DAFs) when appreciated shares create tax leverage:
donor-advised funds.

Related resources

• RSU vests: design a rules-based selling plan
• ISO strategy: holding periods, AMT, and timing
• The high earner’s guide to SALT & residency cleanup
• 2025 tax law changes executives should know
• Donor-advised funds: tax-smart giving

External references

• RSU vests
• ISO holding periods
• SALT & residency clean-up
• Taxes as a top lifetime expense
• Donor-advised funds

This content is educational and not tax or legal advice. Consult your tax advisor about your specific situation.