When you live in one state and work in another, it can affect where you file and pay income taxes. Reciprocity can make your tax filing situation simpler if it applies to the states in which you live and work.
What is state tax reciprocity?
To put it simply, if the state where you work has a reciprocal tax agreement with the state where you live, then your work state shouldn’t withhold taxes from your paycheck. This makes filing state taxes simpler because you won’t be required to file a return for both states. You’ll simply fill out a state exemption form and give it to your employer to stop them from withholding taxes for the state where you work.
For example, Iowa and Illinois are two states with a reciprocity agreement. If you live in Iowa and work in Illinois, you should submit a IL-W-5-NR, “Employee’s Statement of Nonresidence in Illinois,” with your employer so they’ll know to withhold Iowa income tax. You’ll only pay state taxes to Iowa because they have a reciprocity agreement with each other.
Tax reciprocity only applies to state and local taxes. You’ll still be required to pay federal income taxes no matter where you live and work.
Tax reciprocity by state
Not all states have reciprocity – even if two states share a border, it doesn’t necessarily mean they have reciprocity with one another. In fact, each state has different rules that affect how income is taxed and reported.
This table provides detailed information about state-specific tax reciprocity agreements and the forms to complete if you work in one state but live in another.
| State | States in agreement | Form(s) to complete |
| Arizona | CA, IN, OR, VI | Form WEC (Withholding Exemption Certificate) |
| Illinois | IA, KY, MI, WI | Form IL-W-5-NR (Employee’s Statement of Nonresidence in Illinois) |
| Indiana | KY, MI, WI, OH, PA | Form WH-47 (Certificate of Residence) |
| Iowa | IL | Form IA-44-016 (Employee’s Statement of Nonresidence in Iowa) |
| Kentucky | IL, IN, VA, WV, OH, WI | Form 42A809 (Certificate of Nonresidence) |
| Maryland | DC, PA, VA, WV | Form MW507 (Employee’s Maryland Withholding Exemption Certificate) |
| Michigan | IN, IL, KY, OH, MN, WI | Form MI-W4 (Employee’s Michigan Withholding Exemption Certificate) |
| Minnesota | MI, ND | Form MWR (Reciprocity Exemption/Affidavit of Residency for Tax Year 2025) |
| Montana | ND | Form MW-4(Reciprocity exemption from withholding for qualifying Minnesota and Montana residents working in North Dakota) |
| New Jersey | PA | Form NJ-165 (Employee’s Certificate of Nonresidence In New Jersey) |
| North Dakota | MN, MT | Form NDW-R (Reciprocity exemption from withholding for qualifying Minnesota and Montana residents working in North Dakota) |
| Ohio | IN, KY, MI, PA, WV | Form IT-4NR (Employee’s Statement of Residency in a Reciprocity State) |
| Pennsylvania | IN, MD, OH, VA, WV, NJ | REV-419 (Employee’s Nonwithholding Application Certificate) |
| Virginia | DC, KY, MD, WV, PA | Form VA-4 (Personal Exemption Worksheet) |
| Washington D.C. | All non-residents who work in D.C. can claim an exemption | Form D-4A (Certificate of Nonresidence in the District of Columbia) |
| West Virginia | KY, MD, OH, VA, PA | Form IT-104 (Employee’s Withholding Exemption Certificate) |
| Wisconsin | IL, IN, KY, MI | W-220 (Nonresident Employee’s Withholding Reciprocity Declaration) |
Where should I file state taxes if I work in a different state?
If there is no reciprocal agreement between your work state and your home state, you should expect to file a return for both states: file as a resident where you live and as a nonresident where you work.
State reciprocity agreements apply to remote workers as well. For hybrid workers, it gets a little more complicated due to states having different rules for in person office days a nonresident employee can work in a nonresident state before withholding is mandated.
Don’t worry – your money won’t be taxed twice if your states don’t have a reciprocal agreement. Federal law does not allow two states to tax the same income. But filing a state return for both is still important because you’ll likely be owed a refund for taxes withheld from your work state.
Types of state reciprocity agreements
State reciprocity agreements are not all the same. Some are defined as bilateral while others are unilateral.
Bilateral agreement
There are 30 state reciprocal agreements in the U.S., with 17 being bilateral. These agreements give tax benefits for residents who work across state lines, allowing for mutual understanding on how income taxes should be handled for those working in a neighboring state. Under these bilateral agreements, residents of one state who are employed in another state are required to pay income taxes only to their home state.
Unilateral agreement
A unilateral agreement is a decision by a single state regarding income taxes earned by its residents in other states, without requiring consent from those states. This agreement is used by three states: Wisconsin, Minnesota, and Indiana, which automatically extend reciprocity to any state that provides similar treatment to its residents.
How to make sure taxes are not withheld by a reciprocal state
It’s the employee’s responsibility to ask the employer to withhold taxes for their home state and not their work state. Each state has its own form to help you do this.These forms usually require personal information, such as your address, tax identification number, and employment details. Completing these forms ensures that you do not overpay or underpay your state taxes. Find the form for your work state in the chart above.
What about states without reciprocity?
If you work and live in two states that weren’t listed above, it doesn’t necessarily mean you owe anything. You just have to file two separate state tax returns. Your home state will credit you the amount withheld from your work state.
But this amount is dependent on your work state’s income tax rate. For example, if your work state has a lower income tax rate than your home state, you may owe your home state money. If the opposite is true, you may be in store for a refund.
