TaxAct: How do I complete my tax return if I live in one state and work in another?
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In the United States, federal taxes apply to workers no matter where they live. State taxes, however, can vary — especially for workers who live and work in different states.

Generally, if you live in one state but work in another, you must file an income tax return in both states. This is because withholding tax is deducted from your paycheck in the state where you work. In some cases, you may benefit from what's called a "reciprocal agreement" between states. A reciprocal agreement allows your employer to withhold taxes from the state where you live instead of the state where you work. In this case, you'll only have to file a return in your resident state, and your taxes will be withheld only in your resident state.

Federal law prohibits multiple states from assessing state taxes on the same income. However, if you work in a state without a reciprocal agreement, you'll likely need to file multiple tax returns: one in the state where you live, and one in the state where you work.

Note:

  • Reciprocal agreements are applicable only if you file the required tax forms. Talk to your employer about filing the necessary paperwork.

  • Some reciprocal agreements are bilateral (both states agree how to handle income taxes for cross-border workers) and some are unilateral (one state decides how it treats the income its residents earn in other states; they don't require agreements from those other states). Most reciprocal tax agreements are bilateral.

  • Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) assess no state income tax. Cross-border workers who work in these states need to pay state taxes only in their states of residence. If you live in one of these states and work in another state, you'll need to file a non-resident return to pay income tax in the state where you work.



States with current reciprocal agreements are listed below.


State States in Agreement Certificate/Form to Use
Arizona California, Indiana, Oregon, Virginia Form WEC Withholding Exemption Certificate
District of Columbia All nonresidents who work in DC can claim exemption from withholding for the DC income tax. Form D-4A Certificate of Nonresidence in the District of Columbia
Illinois Iowa, Kentucky, Michigan, Wisconsin Form IL-W-5-NR Employee's Statement of Nonresidence in Illinois
Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin Form WH-47 Certificate of Residence
Iowa Illinois Form 44-016 Employee's Statement of Nonresidence in Iowa
Kentucky Illinois, Indiana, Michigan, Ohio, West Virginia, Wisconsin, Virginia Form 42A809 Certificate of Nonresidence
Maryland District of Columbia, Pennsylvania, Virginia, West Virginia Form MW 507 Employee's Maryland Withholding Exemption Certificate
Michigan Wisconsin, Indiana, Kentucky, Illinois, Ohio, Minnesota Form MI-W4 Employee's Michigan Withholding Exemption Certificate
Minnesota Michigan, North Dakota Form MWR Reciprocity Exemption/Affidavit of Residency
Montana North Dakota Form NR-2 Employee Certificate of North Dakota Residence
New Jersey Pennsylvania Form NJ-165 Employee's Certificate of Nonresidence in New Jersey
North Dakota Minnesota, Montana Form NDW-R Reciprocity exemption from withholding for qualifying Minnesota and Montana residents working in North Dakota
Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia Form IT-4NR Employee's Statement of Residency in a Reciprocity State
Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia Form REV-419 Employee's Nonwithholding Application Certificate
Virginia Kentucky, Maryland, District of Columbia, Pennsylvania, West Virginia Form VA-4 Personal Exemption Worksheet
West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia Form WV/IT-104 Employee's Withholding Exemption Certificate
Wisconsin Illinois, Indiana, Kentucky, Michigan Form W-220 Nonresident Employee's Withholding Reciprocity Declaration