Reciprocity: States That Do Not Tax Nonresident Workers
You can avoid having taxes withheld in these states if you live elsewhere
Reciprocal agreements allow residents of one state to work in other neighboring states without having to file nonresident state tax returns there. This 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. Several states have reciprocal agreements with others.
It's Mostly About Tax Returns These Days
The reciprocity rule deals predominantly with an employee having to file two or more tax returns—a resident returns in the state where he lives and nonresident returns in any other states where he works.
The U.S. Supreme Court ruled against double taxation in 2015, stating that two or more states are no longer permitted to tax the same earnings. If you live in New York but work in Connecticut and pay taxes on that income in Connecticut, New York cannot tax you on it as well. New York must offer you a credit for the taxes you paid to Connecticut.
So even if you don't live or work in one of the following states with reciprocal agreements, you won't pay taxes on the same money twice. You'll just have to spend a little more time preparing multiple state returns and you'll have to wait for a refund for taxes unnecessarily withheld from your paychecks.
If you work in a state that has reciprocity with your home state, you can simply provide your employer with the required document to avoid having state taxes withheld from your pay there.
The map below shows 17 orange states (including the District of Columbia) where nonresident workers do not have to pay taxes. Hover over each orange state to see existing reciprocity agreements with other states, and which form nonresident workers have to file to get tax exemptions.
Arizona has reciprocity with one neighboring state—California—as well as with Indiana, Oregon, and Virginia. File Form WEC, the Withholding Exemption Certificate, with your employer.
District of Columbia
If you work in D.C. and are a resident of any other state at all, you don't have to file a tax return in D.C. You can submit exemption Form D-4A, a Certificate of Nonresidence, to your employer. But this only works in reverse with two states: Maryland and Virginia. If you live in D.C. but work in either of these states, you do not have to file a nonresident return there.
If you work in Illinois and are a resident of Iowa, Kentucky, Michigan, or Wisconsin, you can submit exemption Form IL-W-5-NR to your employer.
Indiana has reciprocity with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. Submit exemption Form WH-47 to your Indiana employer.
Iowa has reciprocity with only one state—Illinois. If you work in Iowa and are a resident of Illinois, your employer does not have to withhold Iowa state income taxes from your wages. Submit exemption Form 44-016 to your employer.
Kentucky has reciprocity with seven states. If you work here but you are a resident of Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin, you can submit exemption Form 42A809 to your employer.
Residents of Virginia must commute daily to qualify, however, and residents of Ohio cannot be shareholders of 20 percent or more in an S chapter corporation.
If you work in Maryland and are a resident of the District of Columbia, Pennsylvania, Virginia, or West Virginia, submit exemption Form MW 507 to your employer.
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.
If you work in Minnesota and are a resident of Michigan or North Dakota, submit exemption Form MWR to your employer.
If you work in Montana and are a resident of North Dakota, submit exemption MT-R to your employer.
New Jersey has historically had reciprocity with Pennsylvania, but Governor Chris Christie terminated the agreement effective January 1, 2017. You would have to have filed a nonresident return in New Jersey beginning in 2017 and paid taxes there if you work in the state.
Fortunately, Christie reversed course when a hue and cry rose from residents and politicians alike. You can still submit Form NJ-165 to your employer if you live in Pennsylvania and work in New Jersey.
If you work in North Dakota and are a resident of Minnesota or Montana, submit exemption Form NDW-R to your employer.
If you work in Ohio and are a resident of Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia, submit exemption Form IT-4NR to your employer.
If you work in Pennsylvania but are a resident of Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia, submit exemption Form REV-419 to your employer.
Virginia has reciprocity with the District of Columbia, Kentucky, Maryland, Pennsylvania, and West Virginia. Submit exemption Form VA-4 to your Virginia employer if you live in one of these states and work in Virginia.
If you work in West Virginia and are a resident of Kentucky, Maryland, Ohio, Pennsylvania, or Virginia, submit exemption Form WV/IT-104R to your employer.
If you work in Wisconsin and are a resident of Illinois, Indiana, Kentucky, or Michigan, submit exemption Form W-220 to your employer.
Intuit Turbo Tax. "Which states have reciprocal agreements?" Accessed April 3, 2020.
Supreme Court of the United States. "13-485 Comptroller of Treasury of MD. v. Wynne (05/18/2015)." Accessed April 3, 2020.
Arizona Department of Revenue. "Withholding Exceptions." Accessed April 3, 2020.
DC.gov Office of Tax and Revenue. "Individual Income Tax Special Circumstances FAQs." Accessed April 3, 2020.
Illinois Revenue. "What If I Live or Work in a State That Has a Reciprocal Agreement With Illinois?" Accessed April 3, 2020.
State of Indiana Department of Revenue. "Information Bulletin #28 Income Tax November 2016." Accessed April 3, 2020.
Iowa Department of Revenue. "Iowa - Illinois Reciprocal Agreement." Accessed April 3, 2020.
Kentucky Department of Revenue. "103 KAR 17:140. Individual Income Tax - Reciprocity - Nonresidents." Accessed April 3, 2020.
Comptroller of Maryland. "Administrative Release No. 37: Subject: Domicile and Residency." Accessed April 3, 2020.
Michigan Department of Treasury. "Are My Wages Earned in Another State Taxable in Michigan if I am a Michigan Resident?" Accessed April 3, 2020.
Minnesota Department of Revenue. "Reciprocity Exemption/Affidavit of Residency for Tax Year 2019." Accessed April 3, 2020.
Montana Department of Revenue. "North Dakota Reciprocity Agreement." Accessed April 3, 2020.
State of New Jersey Division of Taxation. "NJ Income Tax – PA/NJ Reciprocal Income Tax Agreement." Accessed April 3, 2020.
North Dakota Office of State Tax Commissioner. "NDW-R." Accessed April 3, 2020.
Ohio Department of Taxation. "Employee’s Statement of Residency in a Reciprocity State." Accessed April 3, 2020.
Pennsylvania Department of Revenue. "REV-419 Employee’s Nonwithholding Application Certificate." Accessed April 3, 2020.
Virginia Tax. "Reciprocity." Accessed April 3, 2020.
West Virginia State Tax Department. "West Virginia Employee's Withholding Exemption Certificate Form WV/IT-104." Accessed April 3, 2020.
State of Wisconsin Department of Revenue. "Individual Income Tax Working in Another State." Accessed April 3, 2020.