State Tax Reciprocal Agreements 2021

State Tax Reciprocal Agreements 2021: What You Need to Know

For individuals who work in one state but live in another, navigating state tax laws can be a frustrating and confusing endeavor. However, for those living and working in states that have entered into reciprocal agreements, the process can be much simpler. In this article, we will explain what state tax reciprocal agreements are, which states currently have them in place, and what changes have occurred in 2021.

What are State Tax Reciprocal Agreements?

State tax reciprocal agreements are agreements between two states that allow individuals who live in one state and work in the other to pay income tax only in the state where they live. In other words, the individual is not required to pay income tax in the state where they work.

These agreements can be extremely beneficial to taxpayers, as they can reduce the administrative burden of filing income tax returns in both states. They can also help to avoid double taxation, which occurs when an individual is required to pay income tax in both the state where they live and the state where they work.

Which States Have Reciprocal Agreements?

As of 2021, there are 17 states that have reciprocal agreements with one or more states. These states include:

– Illinois

– Indiana

– Iowa

– Kentucky

– Maryland

– Michigan

– Minnesota

– Montana

– New Jersey

– North Dakota

– Ohio

– Pennsylvania

– Virginia

– West Virginia

– Wisconsin

– District of Columbia

– Missouri (unilateral)

It is important to note that the terms of these agreements vary from state to state. For example, some agreements may apply to all types of income, while others may only apply to certain types of income, such as wages and salaries.

Changes in 2021

While there have not been any major changes to state tax reciprocal agreements in 2021, it is important for taxpayers to keep abreast of any changes that may occur. The COVID-19 pandemic has also had an impact on state tax laws, as many states have implemented temporary changes in response to the pandemic. These changes may include extended deadlines for filing income tax returns or changes to tax rates.

Conclusion

For individuals who live in one state and work in another, state tax reciprocal agreements can make the process of filing income tax returns much simpler. As of 2021, there are 17 states that have reciprocal agreements in place, and taxpayers should keep an eye out for any changes that may occur in the future. By staying informed and understanding the terms of these agreements, taxpayers can ensure that they are complying with state tax laws and minimizing their tax burden.