New Jersey and Pennsylvania have a reciprocal agreement. Compensation paid to New Jersey residents employed in Pennsylvania is not subject to Pennsylvania income tax. Compensation means salaries, wages, tips, fees, commissions, bonuses, and other remuneration received for services rendered as an employee.
The taxpayer cannot claim a credit for taxes paid to Pennsylvania on their New Jersey return. If the taxpayer had Pennsylvania income tax withheld from their wages, file a Pennsylvania nonresident return to obtain a refund.
Pennsylvania Nonresident return:
- Adjustments to Income
- Reciprocal State Wage Adjustment - Enter the Pennsylvania income taxed in both states as a negative number
Pennsylvania requires proof that taxes were paid to the other state. Print and mail the Pennsylvania return along with a copy of the New Jersey state return, the W-2(s) with the Pennsylvania income and a statement explaining the taxpayer is a resident of a reciprocal state.
To claim exempt from future Pennsylvania withholdings, file Form REV-419 with the employer.
Note: The Reciprocal Agreement between Pennsylvania and New Jersey is not extended to Philadelphia. Therefore, income earned in Philadelphia and taxed in both New Jersey in Philadelphia qualifies for a credit for taxes paid on the New Jersey return.
The wages on the W-2 may be different than the actual income taxable to Philadelphia. To figure the taxable wages, see the New Jersey instructions.
To claim a credit for Philadelphia taxes paid on the New Jersey return, from the main menu of the New Jersey Return select:
- Credits
- Credit for Taxes Paid to Another State
- Credit for Taxes Paid to Philadelphia or other Jurisdiction
Additional Information: