If you live and work in two different states, which do you pay taxes to? State tax reciprocity is a cooperative agreement between two or more states that simplifies the tax obligations of individuals who work or live in multiple states. This arrangement alleviates the complexities associated with filing multiple state tax returns. Additionally, it reduces the administrative burden on taxpayers. In this article, we’ll discuss which states have tax reciprocity to make your multi-state filings as simple as possible.
Understanding State Tax Reciprocity
In the United States, each state has the authority to impose its own income tax on residents and non-residents. This can create challenges for individuals who live in one state but work in another, as they may be required to file tax returns in both states. To address these challenges, some states have entered into reciprocal agreements to simplify the tax process.
Reciprocal agreements typically involve neighboring states and allow residents of one state who work in another to be taxed only by their state of residence. This means that income earned in the non-resident state is not subject to that state’s income tax. Instead, the taxpayer pays income tax only to their state of residence.
States with Tax Reciprocity
Several states in the U.S. have established tax reciprocity agreements. These include:
| If you work in… | But live in… | Exemption Form |
| Arizona | California, Indiana, Oregon, or Virgina | Form WEC |
| District of Columbia | Anywhere other than District of Columbia | Form D-4A |
| Illinois | Iowa, Kentucky, Michigan, or Wisconsin | IL-W-5-NR |
| Indiana | Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin | WH-47 |
| Iowa | Illinois | 44-016 |
| Kentucky | Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin | 42A809 |
| Maryland | District of Columbia, Pennsylvania, Virginia, or West Virginia | MW 507 |
| Michigan | Illinois, Indiana, Kentucky, Minnesota, Ohio, or Wisconsin | MI-W4 |
| Minnesota | Michigan or North Dakota | MWR |
| Montana | North Dakota | MW-4 |
| New Jersey | Pennsylvania | NJ-165 |
| North Dakota | Minnesota or Montana | NDW-R |
| Ohio | Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia | IT-4NR |
| Pennsylvania | Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia | REV-419 |
| Virginia | District of Columbia, Kentucky, Maryland, Pennsylvania, or West Virginia | VA-4 |
| West Virginia | Kentucky, Maryland, Ohio, Pennsylvania, or Virginia | WV/IT-104 NR |
| Wisconsin | Illinois, Indiana, Kentucky, or Michigan | W-220 |
Tax Help for Those Who Live and Work in Different States
State tax reciprocity provides a valuable solution for individuals navigating the complexities of working and living across state lines. By fostering cooperation between states, these agreements aim to simplify the tax process, reduce administrative burdens, and encourage cross-border employment. Taxpayers should stay informed about the specific details of reciprocal agreements and any changes in tax laws to ensure compliance and make the most of these streamlined tax arrangements. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
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