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States Enact Nonresident Employee Withholding Relief - HR ALERTS

States Enact Nonresident Employee Withholding Relief

Due: January 1, 2026

Alabama and Louisiana have enacted 2026 changes that expand income tax withholding exemptions for nonresident employees performing short-term services in the state. These updates are especially relevant for employers with traveling, project-based, or disaster response workforces.


Alabama

Short-Term Service and Disaster Response Exemptions

  • Compensation paid to a nonresident employee working in Alabama for 30 or fewer days is exempt from state and local income tax withholding, if statutory conditions are met.

  • This exemption does not apply to professional athletes, professional entertainers, or public figures.

  • Compensation paid to nonresidents temporarily in Alabama to perform disaster or emergency-related services following a declaration by the U.S. President or the Alabama Governor is also exempt from state and local income tax withholding.



Louisiana

Expanded Short-Term Service Threshold

  • Louisiana increases the nonresident employee withholding exemption threshold from 25 days to 30 days.

  • Employers are not required to withhold Louisiana income tax for nonresident employees who work in the state for 30 or fewer days during the calendar year.

  • If a nonresident employee works more than 30 days in Louisiana, the employer must withhold and remit tax on all wages earned in the state, including the first 30 days.



What Employers Should Do Now

Employers with multi-state or mobile employees should review time-tracking practices, nonresident workdays, and payroll withholding rules to ensure proper application of these expanded exemptions beginning in 2026.

Get day-to-day updates on States Enact Nonresident Employee Withholding Relief visit the Vida HR Knowledge Center (Vida HR Clients Exclusive).

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