For many of us, it’s hard to remember what the morning commute felt like.

It’s been over two years now, and we’ve forever ditched the drive/walk/ride into work in favor of sleeping a little later, and sitting at the kitchen table in pajamas to check our first emails.

To say the least, Covid has changed things. Companies that allow remote work are reaping the benefits of attracting and keeping hard-to-find talent in a difficult hiring market… and workers like you love it. More and more workers are requiring remote work options for their new jobs, and this trend isn’t likely to reverse.

For example, a number of our clients have pursued new jobs, and others are at companies who’ve quickly adapted to remote work, allowing them to move to a completely different state, away from the major city the company is based in.

These remote work changes might not seem so significant at first, but they can actually have major effects on the long-term financial plan of tech employees.

Naturally, a lot of tech employees are starting to think about what that means for their finances. Including state taxation of stock options.

How?

1. Use Remote Work to Advance Your Career

When you’re a tech employee, your career moves are often the most important in fulfilling your financial goals:

Your salary increases, your stock options improve, and you get offered more benefits.

With a good financial and tax planner, you can use the upward career mobility to negotiate better comp (salary and stock options), save money, invest wisely, and achieve financial freedom.

Before the Covid outbreak, a lot of tech employees were heavily location-dependent. So much so, that a lot of our content on this blog specialized around helping you manage your money in the high-cost locations of San Francisco, Silicon Valley, and New York.

After all, most of the tech jobs were located in these cities, so you needed to be present there to advance your career. You were limited on where you could live if you wanted a successful career. But now that work from home is an option, you have a lot more flexibility in where you live, without necessarily limiting your career.

I should know; I’ve been working from home and working remotely for a long time.

Even though KB Financial Advisors is based in San Francisco, I live in Tennessee. Here, my family and I enjoy a lower cost of living, but I still get to help clients like you all over the country: it really doesn’t matter where you live. My career as a financial advisor for people based in San Francisco, Silicon Valley, or New York is not limited.

With remote work as an option, you can still earn the salary you’d attract in a tech-hub city, but with a significantly lower cost of living and state taxation. When this happens, everything about your financial life becomes much easier, and you can achieve your goals a lot faster. (You can even take a job at a company located across the country, without having to move.)

2. Save Money on Real Estate

Ever since we’ve been in business, one of our biggest client concerns has been the cost of real estate in San Francisco and New York. When even modest homes cost over $1 million, home ownership becomes difficult. (In fact, a lot of people had to maneuver ways to use their company stock options or IPO to buy a house.)

With an extremely high down payment and mortgage payments higher than what they’d pay in rent, a lot of people felt trapped in not being able to purchase a home.

However, with remote work, moving to a place with a lower cost of living and lower state taxation makes buying a house much easier. You can make that investment sooner and spend less, which will make it easier to save towards other goals.




3. Save on State Taxation Rates

As a tech employee, your largest single expense category is taxes.

You spend more on tax than you spend on anything else. In fact, taxes matter so much in a financial plan, that a big part of what we do is making sure people aren’t getting slapped with an unexpected, unaffordable tax bill.

So, now that remote work is more available, moving to a state with lower income taxes is one of the best things you could do for your financial plan.

You can’t just casually do it though; most states are pretty aggressive about collecting your taxes (even more than the IRS). You have to make sure you move in a way that clearly says “I am not coming back.” If you don’t, you may be audited. Renting a cheap apartment in the middle of nowhere to remote work won’t cut it. You have to make it official.

Here’s how you do it:

After you choose your new state, it’s a good idea to send emails to people letting them know you’re moving.

Next, you’ll need to change everything official to the new state: your mailing address, your driver’s license, and your voter registration. Then, change your payroll and have your company start your tax withholding in the new state.

Beware of State Taxation of Stock Options

This varies depending on the state you move to, but even if you officially move to a new state and set up your payroll withholdings, you may still owe state income tax to the state you leave on stock options or RSU.

This rule varies based on the type of options you have and which states are involved, but it’s good to know that you may still owe tax to the state of residence at the time those options were granted, even if you lived elsewhere when you exercised them. (This is where having a financial planner on your side can really help you out, because state taxation of stock options can be a headache.)




Which Remote Work Financial Moves Should You Make?

The cool thing is that you’ve got seemingly unlimited choices where you had very few choices before.

Many of our clients are settling into their new normal and finding the right combinations of choices that work, including lower state taxes, and we couldn’t be happier for them.

We’d be happy to help you make the financial decisions that make the most sense for you, as well as prepare you tax-wise so every move you make is financially sound.

Click here to book a discovery call with us, or use the button below.