State income tax reciprocity agreements are designed to simplify tax obligations for individuals who live in one state and work in another. These agreements prevent double taxation on wage and salary income by allowing residents to pay income taxes only in their home state.
For residents of Virginia and its neighboring states, understanding these agreements is essential. Whether you're commuting daily across state lines or managing a workforce that does, knowing which states have reciprocal arrangements and how to comply with them can save time, money, and avoid tax filing errors.
Virginia has entered into tax reciprocity agreements with five neighboring jurisdictions:
These agreements are designed to simplify income tax obligations for individuals who live in one of these states but earn wages or salary in the other. Under these arrangements, residents are taxed only by their state of residence on wage and salary income, even if that income is earned across state lines.
For example, a Virginia resident working in Maryland can request to be exempt from Maryland income tax withholding. Instead, they will only need to pay Virginia income tax, avoiding the complexity of dual state tax filings and potential double taxation.
It’s important to understand that these agreements are limited in scope. They apply only to wage and salary income—typically the earnings reported on a W-2 form. Other types of income are not covered, including:
If you earn these types of income from a reciprocal state, you may still be subject to nonresident tax filing requirements in that state. Always consult a tax professional if you receive non-wage income from outside Virginia.
To benefit from Virginia’s tax reciprocity agreements, individuals must meet specific residency and income criteria. These rules ensure that only eligible taxpayers avoid double taxation on wages and salary income earned across state lines.
If you live in Virginia and commute to work in one of the reciprocal states (DC, KY, MD, PA, or WV), you may be exempt from paying state income tax in the work state—but only if you meet all of the following conditions:
If you reside in the District of Columbia, Kentucky, Maryland, Pennsylvania, or West Virginia and work in Virginia, you may avoid Virginia state income tax withholding by meeting the following criteria:
If you qualify for tax reciprocity under Virginia’s agreements with neighboring states, you can avoid income tax withholding in the state where you work by filing the appropriate exemption form with your employer. This step is essential to ensure that taxes are withheld only by your state of residence, helping you avoid filing unnecessary nonresident returns or seeking refunds later.
When you start a job in a reciprocal state—or if your circumstances change (such as a move or a change in tax residency)—you should notify your employer by submitting the proper exemption form. This form tells your employer that you are not subject to the state income tax of your work location because you are a resident of a reciprocal state.
Once the form is on file, your employer will withhold only Virginia income tax (or your state of residence's tax) from your paychecks, not the tax from the work state.
To claim exemption from withholding in a reciprocal state, use the following forms:
Tip: Each form is slightly different, so it’s important to read the instructions carefully. Some forms require you to affirm your state of residence, while others require you to specifically cite the reciprocity agreement.
Failing to submit the correct exemption form can lead to:
For peace of mind and efficient tax compliance, make sure your employer has the correct form on file as soon as you begin working in a reciprocal state.
Virginia has tax reciprocity agreements with the District of Columbia, Kentucky, Maryland, Pennsylvania, and West Virginia.
Submit the appropriate exemption form to your employer in the work state (see Section 4 for forms). This prevents that state from withholding income tax.
Typically no, if you're eligible under the reciprocity agreement and only have wage income. File in your home state only.
Only wage and salary income is covered. Other income types like self-employment, rental, or capital gains are not included.
You’ll need to file a nonresident return in that state to claim a refund, and still file your resident return in your home state.
Understanding Virginia’s tax reciprocity agreements can help residents and employers simplify cross-border employment tax issues. By meeting eligibility requirements and filing the appropriate exemption forms, you can avoid unnecessary withholding and ensure compliance with both states’ tax laws.
Whether you're an individual commuter, a multi-state employer, or a tax professional, being informed about these agreements will ensure proper tax handling and peace of mind during tax season.
Make cross-border taxes simple—contact Watter CPA today for expert help with Virginia reciprocity agreements and multi-state tax filings.
