States With Reciprocity

If the state in which you work has a reciprocity agreement with the state in which you live, the procedure is usually simple.

“You won’t be taxed on where the income is earned; you’ll just be taxed on where you live,” Richard Auxier, senior policy associate for the Tax Policy Center, says.

You can ask your employer to have income taxes withheld for the state where you live, and you generally file a state income tax return like you would if you worked in your home state.

The following states don’t tax income but their other taxes vary:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

States With Reciprocity

If the state in which you work has a reciprocity agreement with the state in which you live, the procedure is usually simple.

“You won’t be taxed on where the income is earned; you’ll just be taxed on where you live,” Richard Auxier, senior policy associate for the Tax Policy Center, says.

You can ask your employer to have income taxes withheld for the state where you live, and you generally file a state income tax return like you would if you worked in your home state.

Fifteen states and the District of Columbia have reciprocity agreements

The District of Columbia represents a unique case because D.C. is precluded from taxing nonresidents regardless of where they earn income,”

• Virginia and Maryland have responded to this by adopting commuter agreements which exempt each other’s residents from tax but also ensure that they are able to tax their residents when they work in D.C.”
• DC, KY, IL, IN, MI, OH, VA, WV, WI, MN, ND, NJ, PA, MD, AZ, CA

For the states without reciprocity, you’ll need to file a nonresident tax return for the state where you work and a resident tax return for the state where you live. Also, find out how your state and residence calculates any credit for taxes paid on out-of-state work.