Live in Texas, Work Remotely for a Alabama Employer: Who Taxes You?
Answer
Your employer's state gets nothing, and neither does yours. Wages are sourced to where the work is physically done — Texas, which does not tax them — and Alabama does not run a rule that would source your remote days back to it. No withholding, no returns.
Last verified
Wages are sourced to the place where the work is physically performed. That default is what makes remote work simple, and it is only disturbed when the employer's state runs a convenience-of-the-employer rule. Alabama does not.
Alabama also has a layer below the state one, and it is the layer that survives every agreement: Several Alabama municipalities levy an occupational licence fee on wages earned inside the city — Birmingham is the largest. It is collected by the city, not the Department of Revenue, and no state agreement or credit covers it.
What you file
There is nothing to file in either Texas or Alabama on these wages. Your federal return is unaffected — the federal government taxes the income whatever the states do.
The two states, side by side
| Texas | Alabama | |
|---|---|---|
| Taxes wages | No | Yes — graduated |
| Reciprocity partners | None | None |
| Convenience rule | No | No |
| Nonresident return | Not applicable | Form 40NR |
| Credit for other-state tax | No income tax | Schedule CR |
| Nonresident safe harbour | Not applicable | None published |
| Local income tax | No | Yes |
| Revenue department | Texas Comptroller of Public Accounts | Alabama Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Alabama and working in Texas gives:Home state only.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- W-2 commuter: Texas → AlabamaWork state only
- 1099 contractor: Texas → AlabamaClient state only, if you work there
- Moved mid-year: Texas → AlabamaOne part-year return — the state you moved to
Other Texas pairs
Questions people actually ask
I live in Texas and work remotely for a Alabama employer. Which state do I pay?
Your employer's state gets nothing, and neither does yours. Wages are sourced to where the work is physically done — Texas, which does not tax them — and Alabama does not run a rule that would source your remote days back to it. No withholding, no returns.
Which state should my employer be withholding for?
Neither. There is no state income tax to withhold on either side of this pairing, so a state line on your pay stub for Texas or Alabama is an error worth querying.
Does my Alabama employer's location alone create a Alabama tax obligation?
No. Alabama sources wages to the place where the work is physically performed, and it does not apply a convenience-of-the-employer rule that would override that. Days you actually spend working inside Alabama are a different matter — those are Alabama-source income and can require a nonresident return.
How current is this?
The Texas and Alabama rules on this page were last checked against Texas Comptroller of Public Accounts and Alabama Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Texas Comptroller of Public Accounts — individual income taxaccessed 2026-08-07
- Alabama Department of Revenue — individual income taxaccessed 2026-08-07