If you are a Pennsylvania resident and New Jersey Income Tax was withheld from your wages, you must file a New Jersey nonresident return to get a refund. Likewise, if you are a New Jersey resident and your employer withheld Pennsylvania income tax from wages, you must file a Pennsylvania return to get a refund.

Are PA and NJ reciprocal tax agreement?

NJ/PA Reciprocal Agreement The Reciprocal Personal Income Tax Agreement between Pennsylvania and New Jersey means compensation paid to New Jersey residents employed in Pennsylvania is not subject to Pennsylvania income tax.

Are taxes higher in PA or NJ?

Pennsylvania’s sales tax rate is 6%. New Jersey’s tax rates start at 1.4% and rise up to 10.75% for income over $5 million, Kiely said. Pennsylvania has a single tax bracket of 3.07%. “In New Jersey, a single person with over $35,000 in taxable income would be at the 3.5% tax rate,” he said.

Do you have to pay taxes in New Jersey if you work in Pennsylvania?

Both New Jersey and Pennsylvania are among the many states that require employers to withhold state income tax from employees who work in those states. On occasion, an employee might live in one state and work in another. If you are a resident of New Jersey who works in Pennsylvania, your employer must apply specific withholding practices.

What to do when you work in New Jersey and live in Pennsylvania?

For example, a Pennsylvania resident working in New Jersey will give the New Jersey employer a Form NJ-165, Employee’s Certificate of Nonresidency in New Jersey, which certifies the employee is a resident of Pennsylvania and that Pennsylvania’s income tax should be withheld rather than New Jersey’s income tax.

What happens if you work in Pennsylvania and live in another state?

If you live in Pennsylvania and work in one of the two nonreciprocal states, the Pennsylvania credit is limited to the lesser of the tax you paid to the nonresident state or the Pennsylvania tax due on the compensation that was taxed in the nonresident state.

Can You claim Philadelphia taxes on your NJ tax return?

Yes, you claim a credit for taxes paid to Philadelphia on your NJ return. However, you should have a W2 showing NJ taxes withheld. NJ and PA have reciprocity, so residents only pay state tax to their home state. Cities aren’t covered by reciprocity, which is why Philadelphia was withheld.