When it comes to traveling between states, it`s essential to know whether a reciprocal agreement exists between them. If you`re a Pennsylvania resident planning a visit to Maryland or vice versa, you may be wondering whether these two states have a reciprocal agreement. Let`s take a closer look at the matter.
Firstly, it`s important to understand what a reciprocal agreement is. In essence, it is an agreement between two or more states that allows residents to pay taxes only in their home state, even if they work in a neighboring state. Such an agreement aims to avoid double taxation and to simplify tax filing procedures for cross-border workers.
So, does Pennsylvania have a reciprocal agreement with Maryland? Unfortunately, the answer is no. There is no reciprocal agreement between these two states, meaning that if you work in one state but live in the other, you`ll have to file tax returns in both states.
If you`re a Pennsylvania resident who works in Maryland, you`ll be subject to Maryland`s state income tax, which ranges from 2% to 5.75%. Additionally, you`ll still need to file a Pennsylvania tax return and pay state income tax, which ranges from 3.07% to 3.4%. Keep in mind that Pennsylvania does offer a tax credit for taxes paid to other states, which can help reduce your tax bill.
On the other hand, if you`re a Maryland resident who works in Pennsylvania, you`ll be subject to Pennsylvania`s state income tax, which ranges from 3.07% to 3.4%. You`ll also need to file a Maryland tax return and pay state income tax, which ranges from 2% to 5.75%. Again, Maryland offers a tax credit for taxes paid to other states, so you may be able to reduce your tax bill.
In conclusion, Pennsylvania and Maryland do not have a reciprocal agreement. If you work in one state but live in the other, you`ll need to file tax returns in both states and pay income tax accordingly. It`s crucial to understand the tax laws and regulations of each state before accepting a job or moving to a different state, as tax rates and rules can vary significantly. Consulting a tax advisor or accountant can also help you navigate the complexities of cross-border taxation.