When you live in one state and work in another, it can impact 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 does state tax reciprocity mean?
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.
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.
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.
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.
Does my state have reciprocity with a neighboring state?
Not all states have reciprocity – even if two states share a border, it doesn’t necessarily mean they have reciprocity with one another. See the complete list of states that have reciprocity agreements in the section below, ‘States with tax reciprocity.’
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. Find the form for your work state in the chart below.
States with tax reciprocity
|State||States in agreement||Form(s) to complete|
|Arizona||CA, IN, OR, VI||Arizona 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 44-106 (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 2022)|
|Montana||ND||Form MW-4 (Employee Certificate of North Dakota Residence)|
|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||Form 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 exemption||Form D-4A (Certificate of Nonresidence in the District of Columbia)|
|West Virginia||KY, MD, OH, VA, PA||Form WV/IT-104 (Employee’s Withholding Exemption Certificate)|
|Wisconsin||IL, IN, KY, MI||Form W-220 (Nonresident Employee’s Withholding Reciprocity Declaration)|
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.
For more info about filing taxes in two different states, read Filing Taxes When You Live in One State and Work in Another.
This article was last updated on 09/29/2022.