How Do I Know If My States Have A Reciprocal Agreement

April 9, 2021

Employees residing in one of the reciprocal states can submit Form WH-47, Certificate Residence, to apply for an exemption from Indiana State income tax. First, some basic information: almost all states that collect income tax require that tax be paid on all income collected in the state, including the income of non-residents. As a general rule, non-residents must pay this income tax by filing a non-resident income tax return with the state and a regular annual return for all income (if any) in the state in which they reside. These returns contain all income earned, regardless of where they were earned. As a general rule, residents can take a credit on return to their country of residence for taxes paid to other states. Reciprocity agreements mean that two states allow their residents to pay taxes only where they live, not where they work. This is particularly important, for example, for people with higher incomes who live in Pennsylvania and work in New Jersey. Pennsylvania`s top tax rate is 3.07%, while New Jersey`s maximum tax rate is 8.97%. Ohio has tax coverage with the following five states: The map below shows 17 orange states (including the District of Columbia) where non-resident workers living in reciprocal states do not have to pay taxes. Move the cursor over each orange state to see their reciprocity agreements with other states and find out what form non-resident workers must submit to their employers to be exempt from deduction in that state. Reciprocal agreements between states allow workers who work in one state but live in another to pay only income taxes to their state of residence. If reciprocity exists between the two states, staff must complete a certificate of non-residence and give it to you so that the tax on the place of residence can be withheld in place of the workplace tax. Virginia has reciprocity with the District of Columbia, Kentucky, Maryland, Pennsylvania and West Virginia.

Submit the 4-year form to your employer in Virginia if you live in one of these states and work in Virginia. Employees who live in one state but work in another state are sometimes subject to additional sources of payroll tax, unless there is mutual agreement between their states.

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