State Tax Reciprocity Agreements (2026)

How Reciprocity Works (and What It Replaces)

Without reciprocity, a worker who lives in one state and works in another faces double withholding and double filing. The work-state withholds non-resident income tax from the paycheck. The home-state taxes the worker on worldwide income, including the wages from the work state. The worker then files two state returns and claims a credit on the home-state return for tax paid to the work state. The credit-for-other-state mechanism prevents literal double taxation but produces complexity and timing differences in withholding.

Reciprocity short-circuits this. Two states agree that workers crossing the border for employment will be taxed only by their home state. The work-state employer stops withholding work-state tax (after the worker submits the appropriate exemption form) and may begin withholding home-state tax via reciprocity withholding arrangements. The worker files only the home-state return. The work-state receives no wage-tax revenue from the cross-border worker.

The economic effect of reciprocity is to push the wage-tax revenue to the home state, regardless of where the work physically occurs. Reciprocity agreements typically arose between adjacent states with substantial historical commuter populations (e.g. NJ-PA, MD-VA-DC) where the political compromise was to simplify life for the commuter at the cost of revenue equalisation between the two state treasuries.

The Active US Reciprocity Agreements (2026)

Each row is a bilateral agreement. Forms shown are the withholding-stop forms a non-resident worker submits to a work-state employer to stop work-state withholding. Mirror forms are referenced where the same agreement appears under the other state's heading.

Source: each state's 2026 Department of Revenue published reciprocity table; Federation of Tax Administrators state-reciprocity reference. The list represents the 17 distinct bilateral agreements, shown bidirectionally for searchability.

The Mid-Atlantic Cluster

The Mid-Atlantic cluster includes the densest reciprocity network in the US, reflecting the historical Philadelphia-NJ commuter corridor and the DC-Maryland-Virginia federal-government workforce. Pennsylvania is a hub: it has reciprocity with New Jersey (since 1977, the oldest US reciprocity agreement), Maryland, Ohio, Virginia, West Virginia and Indiana. A Pennsylvania resident working in any of those states files only in PA on the wages.

Maryland is similarly central: reciprocity with DC, Pennsylvania, Virginia and West Virginia. The DMV (DC-Maryland-Virginia) federal-worker corridor is structured around these agreements: a federal employee living in Bethesda, Maryland and working at a DC headquarters files only the Maryland resident return, with no DC non-resident withholding.

Virginia's agreements with DC, Kentucky, Maryland, Pennsylvania and West Virginia reinforce the same pattern. The DC-Virginia reciprocity (per the DC Office of Tax and Revenue) means DC does not impose non-resident wage tax on Virginia commuters.

The Midwest Cluster

The Midwest cluster centres on Illinois, Indiana, Kentucky, Michigan, Ohio and Wisconsin, with secondary participation by Iowa, Minnesota and North Dakota. Illinois has reciprocity with Indiana, Iowa, Kentucky, Michigan and Wisconsin. A Chicagoland worker living in northwest Indiana (Lake County, Porter County) and commuting into the Loop files only the Indiana resident return.

Indiana reciprocity extends to Illinois, Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin. A Louisville-area Kentucky resident working in Indiana files only in Kentucky. A Cincinnati-area Ohio resident working in southeastern Indiana files only in Ohio. The reciprocity simplifies the Cincinnati and Louisville cross-river commuter populations significantly.

Ohio has reciprocity with Indiana, Kentucky, Michigan, Pennsylvania and West Virginia. Toledo-area workers crossing from Michigan, Cincinnati workers crossing from Kentucky, and Pittsburgh-area workers commuting from Pennsylvania all use Ohio Form IT-4NR or the matching home-state form to stop Ohio non-resident withholding.

States With No Reciprocity (and Why It Matters)

Several major states have no reciprocity agreements with any other state. The notable absences are California, New York, Massachusetts, Connecticut, Florida (no income tax), Texas (no income tax), and most of the western US. The most consequential non-reciprocity pair is New Jersey-New York: NJ residents commuting into New York City file in both states (NJ-1040 with credit for NY tax via Schedule NJ-COJ, plus NY IT-203 non-resident return). See our NJ vs NY commuter math reference for the mechanics.

Connecticut residents working in New York City face the same NJ-NY-style situation: file in both states, claim credit on the CT return for NY tax paid. The credit usually consumes the CT liability and the commuter pays the NY effective rate. A similar pattern applies to a Connecticut resident working in Massachusetts (no reciprocity), and a Massachusetts resident working in Connecticut.

For California residents working remotely for an out-of-state employer, the absence of California reciprocity with any other state is rarely consequential, because California sources income to where work is physically performed. A California resident working remotely from California for a New York employer is taxable to California on the wages, not to New York. The exception is New York's convenience-of-employer rule, which can extend New York source-based taxation to remote workers for New York employers. See our NY convenience-of-employer rule reference.

What Reciprocity Does NOT Cover

Reciprocity covers only wage and salary income subject to W-2 withholding. The following categories of income remain taxable to the work state under standard non-resident sourcing rules, even when a reciprocity agreement is in place:

• Self-employment income from work physically performed in the work state. A Pennsylvania resident freelancing in Trenton, NJ owes NJ non-resident tax on the NJ-source self-employment income, despite the NJ-PA reciprocity covering the same person's W-2 wages from a different NJ employer.
• Partnership distributive shares allocated to the work state. A non-resident partner in a partnership operating in the work state owes work-state tax on the partner's allocable share.
• S-corporation wages and distributions sourced to the work state for non-resident shareholders.
• Rental income from work-state real estate, regardless of the owner's residence.
• Capital gains on real estate in the work state, taxed by the work state on disposition.
• Stock-based compensation sourced to work-state services, even after the worker has relocated. Per New York TSB-M-07(7)I and similar rulings in other states, RSU and NQSO compensation is sourced to the period and location of services giving rise to it.

For a worker whose income is exclusively W-2 wages from a single cross-border employer, reciprocity simplifies filing to a single state return. For workers with mixed income types, the reciprocity benefit applies only to the wage portion; non-wage portions still trigger work-state filing obligations under standard sourcing rules.

Filing Mechanics: The Withholding-Stop Forms

The withholding-stop form is the practical key to using reciprocity. Without the form on file with the employer, the work state continues to withhold non-resident tax, and the worker must claim a refund on the work-state non-resident return at year-end (delaying the cash by months and requiring an additional return).

Pennsylvania Form REV-419 (Employee's Nonwithholding Application Certificate) is filed by a Pennsylvania resident with their non-Pennsylvania employer to certify reciprocity-eligibility. New Jersey Form NJ-165 is the mirror filed by a New Jersey resident with their non-NJ employer. Maryland Form MW507 (with appropriate boxes checked) certifies reciprocity for Maryland residents. Virginia Form VA-4 (with the reciprocity box marked) does the same for Virginia residents. Per the Pennsylvania Department of Revenue REV-419 form page, the worker submits the form to the employer at hire (or when crossing the border for the first time) and updates it when residency changes.

If the form was not filed at the start of the year and the work-state employer withheld in error, the worker files a non-resident return in the work state for the partial year, claiming a refund of the over-withheld tax. The home-state return reports the wages and applies home-state rates as if no work-state withholding had occurred. The cash-flow impact on the worker is delayed but ultimately reaches the same total tax.