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Reciprocal Agreements: States That Do Not Tax Certain Out of State Workers

a list of neighboring states with reciprocal agreements

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Reciprocal agreements allow residents of one state to work in a neighboring state while only paying income taxes to their state of residency.  This simplifies tax time for people who live in one state, but work in another by requiring them to file only one state tax return.  If the state where you work and the state where you live have a reciprocal agreement, you are exempted from income taxes on any wages earned in the state where you work.  You only have to pay taxes to the state where you live. 

These jurisdictions have reciprocal agreements:

  • District of Columbia:  If you work in D.C. and are a resident of any other state you do not have to pay D.C. income taxes on your wages.  You would submit exemption Form D-4A to your employer.
  • Illinois:  If you work in Illinois and are a resident of Iowa, Kentucky, Michigan, or Wisconsin you do not have to pay Illinois income taxes on your wages.  You would submit exemption Form IL-W-5-NR to your employer.
  • Indiana: If you work in Indiana and are a resident of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin you do not have to pay Indiana income taxes on your wages.  You would submit exemption Form WH-47 to your employer.
  • Iowa:  If you work in Iowa and are a resident of Illinois you do not have to pay Iowa income taxes on your wages. You would submit exemption Form 44-016 to your employer.
  • Kentucky:  If you work in Kentucky and are a resident of Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin you do not have to pay Kentucky income taxes on your wages. You would submit exemption Form 42A809 to your employer.
  • Maryland:  If you work in Maryland and are a resident of District of Columbia, Pennsylvania, Virginia, or West Virginia you do not have to pay Maryland income taxes on your wages. You would submit exemption Form MW 507 to your employer.
  • Michigan:  If you work in Michigan and are a resident of Illinois, Indiana, Kentucky, Minnesota, Ohio, or Wisconsin you do not have to pay Michigan income taxes on your wages. You would submit exemption Form MI-W4 to your employer.
  • Minnesota:  If you work in Minnesota and are a resident of Michigan or North Dakota you do not have to pay Minnesota income taxes on your wages. You would submit exemption Form MWR to your employer.
  • Montana:  If you work in Montana and are a resident of North Dakota you do not have to pay Montana income taxes on your wages. You would submit exemption Form NR-2 to your employer.
  • New Jersey:  If you work in New Jersey and are a resident of Pennsylvania you do not have to pay New Jersey income taxes on your wages. You would submit exemption Form NJ-165 to your employer.
  • North Dakota:   If you work in North Dakota and are a resident of Minnesota or Montana you do not have to pay North Dakota income taxes on your wages. You would submit exemption Form NDW-R to your employer.
  • Ohio:  If you work in Ohio and are a resident of Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia you do not have to pay Ohio income taxes on your wages. You would submit exemption Form IT-4NR to your employer.
  • Pennsylvania:  If you work in Pennsylvania and are a resident of Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia you do not have to pay Pennsylvania income taxes on your wages. You would submit exemption Form REV-420 to your employer.
  • Virginia:  If you work in Virginia and are a resident of the District of Columbia, Kentucky, Maryland, Pennsylvania, or West Virginia you do not have to pay Virginia income taxes on your wages. You would submit exemption Form VA-4 to your employer.
  • West Virginia:  If you work in West Virginia and are a resident of Kentucky, Maryland, Ohio, Pennsylvania, or Virginia you do not have to pay West Virginia income taxes on your wages. You would submit exemption Form WV/IT-104R to your employer.
  • Wisconsin:  If you work in Wisconsin and are a resident of Illinois, Indiana, Kentucky, or Michigan you do not have to pay Wisconsin income taxes on your wages. You would submit exemption Form W-220 to your employer.

Special Note Regarding New York Tri-State Area

You’ll notice that the New York tri-state area is absent from this list.  New York, Connecticut, and New Jersey do not have a reciprocal agreement.  This means, for example, if you work in New York and live in New Jersey, you would have to pay New York income taxes as a nonresident and also pay New Jersey income taxes as a resident since you live in New Jersey.  However, residents of New Jersey (and most other states) can take a tax credit for taxes paid to other jurisdictions.

 

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