Does Maryland Have Tax Reciprocity With Pennsylvania?

Maryland and Pennsylvania tax reciprocity means that if you live in one state and work for a W-2 employer in the other, your wages are taxed only by your home state. A Pennsylvania resident with a job in Baltimore owes Pennsylvania income tax on that paycheck, not Maryland’s. A Maryland resident commuting to an office in Philadelphia owes Maryland, not Pennsylvania. The protection is real but narrow: it covers employee wages and nothing else, it does not happen automatically, and local taxes on both sides of the line keep their own rules.

What the Agreement Actually Covers

The reciprocal agreement applies to compensation for personal services, meaning the wages and salary reported on a W-2.¹ If your only income from across the border is W-2 pay, you generally do not need to file a nonresident return in that state at all. You report everything on your home-state return and pay your home state’s rate.

What the agreement does not cover is almost as important. Pennsylvania taxes nonresidents on several categories of Pennsylvania-source income regardless of reciprocity, and Maryland takes the same approach to Maryland-source income earned by Pennsylvania residents:²

Net profit from a business, profession, or farm operated in the other state. A Maryland resident running a sole proprietorship in Pennsylvania owes Pennsylvania’s 3.07% flat income tax on that profit.³
Rental income from property located in the other state.
Gambling winnings from sources in the other state. Pennsylvania Lottery prizes themselves are exempt.⁴
Independent contractor pay reported on a 1099-NEC rather than a W-2.⁴

If you have any of these, you will likely need to file a nonresident return in the state the income came from, and then claim a credit on your home-state return to prevent double taxation.

The Form You File With Your Employer

The agreement does not kick in on its own. Without the right paperwork, your employer’s payroll system will withhold tax for the state where you physically work, and you will spend tax season chasing a refund. The form you file depends on which way you commute.

Pennsylvania Residents Working in Maryland

Complete Maryland Form MW507, the Employee’s Maryland Withholding Exemption Certificate. On the 2026 version, write “EXEMPT” on line 5. That line is specifically for Pennsylvania residents; DC, Virginia, and West Virginia residents use line 4 instead.⁵

Depending on where you live in Pennsylvania, you may also qualify for exemption from Maryland local (county) withholding. Line 6 covers residents of jurisdictions within York or Adams counties. Line 7 covers other Pennsylvania jurisdictions that do not impose an earnings or income tax on Maryland residents. If you qualify for either, write “EXEMPT” on line 4 as well.⁵ If you are unsure whether your Pennsylvania jurisdiction qualifies, confirm with the Comptroller of Maryland or your employer’s payroll office before claiming the exemption.

Maryland Residents Working in Pennsylvania

Complete Pennsylvania Form REV-419, the Employee’s Nonwithholding Application Certificate. Check the box for “Maryland.” That both stops Pennsylvania state income tax withholding and authorizes your employer to withhold Maryland tax instead.⁶ Pennsylvania recommends filing a new REV-419 each year or whenever your personal situation changes.

After You Submit

Hand the form to your employer’s payroll or HR department. The best time is when you start a new job or at the start of a new tax year. Check your next few pay stubs. The work state’s deduction should disappear entirely, and your home state’s withholding should appear in its place. If it doesn’t, follow up before the mistake compounds across the rest of the year.

Local and County Taxes Still Apply

This is the part that catches most cross-border commuters. The reciprocal agreement covers state income tax only. Local taxes on both sides of the line follow their own rules, and some of them still hit you even after your exemption form is on file.

Maryland Residents Working in Pennsylvania

You are exempt from Pennsylvania’s 3.07% state tax, but you still owe Pennsylvania local taxes at your work location. Two separate levies apply:

The Local Earned Income Tax (EIT), imposed by Pennsylvania municipalities and school districts. Your employer must withhold the nonresident EIT rate for the municipality where your worksite sits. Rates vary.⁷
The Local Services Tax (LST), a flat annual tax capped at $52 regardless of how many municipalities you work in. If your total earned income in the municipality is under $12,000, you are exempt from the LST in jurisdictions that charge more than $10.⁸

Pennsylvania Residents Working in Maryland

Maryland imposes a county income tax on top of its state tax. For 2026, county rates range from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties.⁹ Whether you owe this as a Pennsylvania resident depends on whether your home Pennsylvania jurisdiction imposes an equivalent tax on Maryland residents. If it does not, or if it exempts the income or allows a credit, you can claim exemption using lines 6 or 7 of the MW507.¹

The 183-Day Residency Trap

Reciprocity can be shut off entirely by Maryland’s statutory residency rule. If you are domiciled in Pennsylvania but maintain a place of abode in Maryland for 183 days or more during the tax year, Maryland treats you as a statutory resident. At that point you must file a Maryland resident return reporting all of your income, not just Maryland-source wages.¹⁰ You would then have to request a credit from Pennsylvania to avoid being taxed twice, instead of leaning on the reciprocal agreement.

The rule matters most if you keep an apartment or second home in Maryland while claiming Pennsylvania as your domicile. Occasional hotel stays for business do not trigger it. A residence you can return to at any time does.

If Your Employer Already Withheld for the Wrong State

If tax was taken out for the work state because you didn’t file the exemption form in time, started mid-year, or the payroll system got it wrong, you recover the money by filing a nonresident return in that state.¹¹

To recover Maryland tax, file Maryland Form 505, the Nonresident Income Tax Return, and indicate your reciprocity status.
To recover Pennsylvania tax, file Pennsylvania Form PA-40 as a nonresident and claim a refund of the amount withheld.

Both states allow three years from the date the tax was paid to file a refund claim.¹²¹³ Miss the window and the refund is gone, so file as soon as you spot the error.

If You Move Between the Two States Mid-Year

Relocating from one state to the other during the tax year splits the question in two. For the months you lived in one state while working across the border, the agreement shields your wages from the work state’s tax. For the months after you move, you are a resident of the state where you work, and standard resident taxation applies.

You will usually need to file a part-year resident return in both states, splitting your income by the dates you lived in each. Watch the 183-day rule during a transition year: if you kept a home in Maryland for 183 days or more, Maryland may still treat you as a full-year statutory resident.¹ Tell your employer the moment you move so withholding can be redirected to your new home state.

1
Comptroller of Maryland. Maryland Income Tax Administrative Release No. 3
2
Commonwealth of Pennsylvania. Nonresidents and Part-Year Residents
3
Commonwealth of Pennsylvania. Tax Rates
4
Commonwealth of Pennsylvania. Determining Residency
5
Comptroller of Maryland. 2026 Maryland Form MW507 Employee Withholding Exemption Certificate
6
Commonwealth of Pennsylvania. Employee’s Nonwithholding Application Certificate (REV-419)
7
PA Department of Community & Economic Development. Local Withholding Tax FAQs
8
PA Department of Community & Economic Development. Local Services Tax (LST)
9
Comptroller of Maryland. 2026 Maryland State and Local Income Tax Withholding Information
10
Comptroller of Maryland. 2025 MD MW507 Instructions
11
Maryland Comptroller of Maryland. Personal Tax Tip 56 – When You Live in One State and Work in Another
12
Commonwealth of Pennsylvania. Time Limitations on the Filing of Petitions for Refund (REV-460)
13
Maryland General Assembly. Maryland Code Tax – General 13-1104