Taxation across state lines

Taxation across different state lines can be a complex issue. One solution to this problem is state reciprocity agreements. Under these agreements, neighboring states could agree to tax cross-border workers entirely based on residency, avoiding the complexities of taxpayers filing in two states.

However, not all states offer such reciprocity to multistate taxpayers. For example, Kentucky participates in the most agreements with seven, followed by Michigan and Pennsylvania at six apiece. At the other end of the spectrum, Iowa, Montana, and New Jersey offer reciprocity with only one state each, while 25 states with wage income taxes do not offer such reciprocity to multistate taxpayers.

If you work remotely full-time across state lines, you may have to file and pay taxes in two states. It’s entirely possible to pay tax on the same income in two different states.