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.
You cannot claim a credit for taxes paid to Pennsylvania on your New Jersey return. If you had Pennsylvania income tax withheld from your wages, you will need to file a Pennsylvania nonresident return to obtain a refund.
The credit for taxes paid to another state is automatically calculated in your account when you add a Nonresident return to your already created Resident New Jersey return. If you qualify for the reciprocal agreement, you will need to remove the automatic calculation. To do so, log into your account and create the New Jersey Resident and the Pennsylvania Nonresident returns.
Within the PA Nonresident return, go to:
- Adjustments to Income
- Reciprocal State Wage Adjustment
- Enter the PA income taxed in both states as a negative number
Pennsylvania requires proof that taxes were paid to the other state. You must print and mail the PA return along with a copy of the New Jersey state return, the W-2(s) with the PA income and a statement explaining you are a resident of a reciprocal state. To claim exempt from future PA withholdings, file Form REV-419 with your 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 your W-2 may be different than the actual income taxable to Philadelphia. To figure the taxable wages, see the NJ instructions.
To claim a credit for Philadelphia taxes paid on the New Jersey return, go to:
- State Section
- New Jersey Resident Return
- Credit for Taxes Paid to Another State
- Credit for Taxes Paid to Philadelphia or other Jurisdiction