If the state of your residence has a reciprocal agreement with the state you work in, you would not have to file nonresident state tax returns for your state of employment, assuming it follows all the rules. You can simply provide your employer with a required documents. Reciprocity can greatly simplify tax time for people who live in one state but work in another, something that’s relatively common among those who live near state lines. Numerous states have reciprocal agreements with others.
The History of Double Taxation
The reciprocity rule deals with employees having to file two or more state tax returns: a resident return in the state where they live, and nonresident returns in any other states where they might work so they can get back any taxes that were erroneously withheld. As a practical matter, federal law prohibits two states from taxing the same income. The U.S. Supreme Court ruled against double taxation in a case called Comptroller of the Treasury of Maryland v. Wynne in 2015, stating that two or more states are no longer permitted to tax the same earnings. But filing multiple returns might be necessary to be absolutely sure that you’re not being taxed twice. For example, New York can’t tax you if you live in Connecticut but work in New York, and you pay taxes on that earned income to Connecticut. Connecticut is supposed to offer you a tax credit for any taxes you paid to the other state, or you can file a New York state tax return to claim a refund of taxes withheld there.
States With Reciprocal Agreements
The table below shows 16 states where nonresident workers who live in reciprocal states don’t have to pay taxes. Washington, D.C., also has a reciprocity agreement with states.
Washington, D.C.
You don’t have to file a tax return in Washington, D.C., if you work there and you’re a resident of any other state. Submit exemption Form D-4A, the Certificate of Nonresidence in the District of Columbia, to your employer. Unfortunately, this only works in reverse with two states: Maryland and Virginia. You don’t have to file a nonresident return in either of these states if you live in D.C. but work in either of these states.
Illinois
Submit exemption Form IL-W-5-NR to your employer if you work in Illinois and are a resident of Iowa, Kentucky, Michigan, or Wisconsin.
Indiana
Indiana has reciprocity with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. Submit exemption Form WH-47 to your Indiana employer.
Iowa
Iowa has reciprocity with only one state: Illinois. Your employer doesn’t have to withhold Iowa state income taxes from your wages if you work in Iowa and you’re a resident of Illinois. Submit exemption Form 44-016 to your employer.
Kentucky
Kentucky has reciprocity with seven states. You can submit exemption Form 42A809 to your employer if you work here but you’re a resident of Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin. Residents of Virginia must commute daily to qualify, however, and residents of Ohio can’t be shareholders of 20% or more in an S chapter corporation.
Maryland
Submit exemption Form MW 507 to your employer if you work in Maryland and are a resident of Pennsylvania, Virginia, West Virginia, or Washington, D.C.
Michigan
Michigan has reciprocal agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. Submit exemption Form MI-W4 to your employer if you work in Michigan and live in any of these states.
Minnesota
Submit exemption Form MWR to your employer if you work in Minnesota and are a resident of Michigan or North Dakota.
Montana
Submit Form MW-4 to your employer if you work in Montana and are a resident of North Dakota.
New Jersey
You can submit Form NJ-165 to your employer if you live in Pennsylvania and work in New Jersey.
North Dakota
Submit exemption Form NDW-R to your employer if you work in North Dakota and are a resident of Minnesota or Montana.
Ohio
You can submit exemption Form IT-4NR to your employer if you work in Ohio and are a resident of Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia.
Pennsylvania
Submit exemption Form REV-419 to your employer if you work in Pennsylvania but are a resident of Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia.
Virginia
Virginia has reciprocity with Kentucky, Maryland, Pennsylvania, West Virginia, and Washington, D.C. Submit exemption Form VA-4 to your Virginia employer if you live in one of these states and work in Virginia.
West Virginia
Submit exemption Form WV/IT-104 to your employer if you work in West Virginia and are a resident of Kentucky, Maryland, Ohio, Pennsylvania, or Virginia.
Wisconsin
Submit exemption Form W-220 to your employer if you work in Wisconsin and are a resident of Illinois, Indiana, Kentucky, or Michigan.
