New York and Pennsylvania have no tax reciprocity agreement. If you live in one state and work in the other, you file income tax returns in both, your paycheck is typically withheld for the work state, and you claim a resident credit at home to avoid paying full tax twice on the same dollars. The credit prevents literal double taxation, but because the two states’ rates are so different, you end up paying whichever rate is higher. Pennsylvania has reciprocity with six other states, and New York has no income tax reciprocity with any state at all.
What “No Reciprocity” Actually Means
Under a reciprocity agreement, your employer would withhold tax only for your home state, and the work state would leave you alone. That is not how it works across the New York–Pennsylvania line.
Instead, both states claim a piece of your income. The state where you work taxes it because you earned it there. Your home state taxes the same income because residents owe tax on all income regardless of source. You file two state returns, and a resident tax credit on your home-state return offsets the tax you paid to the work state. The credit stops you from paying the full rate in both places. It does not stop you from paying the higher of the two rates overall.
How the Rate Gap Drives Your Bill
Pennsylvania charges a flat 3.07% on taxable income. New York uses graduated rates starting at 4% and climbing to 10.9% on income above $25 million for single filers. Most commuters land somewhere in the 5.5% to 6.85% range on their New York income.
The consequence of that gap is straightforward. If you live in Pennsylvania and work in New York, you pay New York’s higher rate on the work income, and your PA credit only covers up to 3.07% of that income (roughly what PA would have charged). You get no relief for the difference. If you live in New York and work in Pennsylvania, PA withholds 3.07%, and you then owe New York the difference between your New York rate and what PA already took. Either direction, the higher rate wins.
Which Returns You File
Both states require nonresidents to file if they earned even one day of income in the state. If your employer is withholding for the work state, you’ll need a nonresident return there to reconcile withholding or claim any refund.
A Pennsylvania resident working in New York files Form IT-203, the New York nonresident and part-year resident return, to report the New York-sourced income.1Department of Taxation and Finance. Filing Information for New York State Nonresidents They also file the PA-40 resident return in Pennsylvania, reporting all income from every source.2Commonwealth of Pennsylvania Department of Revenue. PA Personal Income Tax Guide – Brief Overview and Filing Requirements
A New York resident working in Pennsylvania files a nonresident PA-40 for the PA-sourced income, then files Form IT-201 as a New York resident reporting all income.3Department of Taxation and Finance. IT-203 Nonresident and Part-Year Resident Income Tax Return Information
File the nonresident return first. You need the final work-state tax number before you can calculate the resident credit at home.
Claiming the Resident Credit
If You Live in New York
New York residents claim the credit for tax paid to Pennsylvania on Form IT-112-R, attached to the IT-201. The credit equals the PA tax you paid on income New York also taxes, capped at the amount of New York tax attributable to that same income.4Department of Taxation and Finance. Resident Credit Because PA’s 3.07% is lower than every New York bracket, the credit will usually absorb the full PA tax. You still owe New York the balance at your New York rate.
An example: you earn $80,000 in Pennsylvania and pay $2,456 in PA tax. On your New York return you report the full $80,000, claim a $2,456 credit on IT-112-R, and pay New York its rate on the income minus the credit.5Tax.NY.Gov. Instructions for Form IT-112-R New York State Resident Credit
If You Live in Pennsylvania
Pennsylvania residents claim the credit on PA Schedule G-L, attached to the PA-40, and must include a copy of the New York return.6PA.gov. PA Schedule G-L Resident Credit for Taxes Paid Instructions The credit is limited to the lesser of the tax actually paid to New York or 3.07% of the New York-sourced income. It can never exceed what Pennsylvania itself would have taxed on that income.7PA.gov. Personal Income Tax Guide – Deductions and Credits
New York’s rates always exceed 3.07%, so the credit typically wipes out your PA liability on the cross-border income. What it doesn’t do is refund the extra tax New York already collected. Your Pennsylvania column zeroes out; your New York bill stays.
Local Taxes That Change the Math
New York City
Good news for Pennsylvania residents commuting into Manhattan: nonresidents are not liable for the New York City personal income tax.8Department of Taxation and Finance. Frequently Asked Questions About Filing Requirements, Residency and Telecommuting The city tax, which runs from 3.078% to 3.876%, applies only to city residents. You owe New York State tax on the work income, not city tax.
Yonkers
Yonkers imposes a 0.50% nonresident earnings tax on people who work in the city but live elsewhere, on top of New York State income tax.9Department of Taxation and Finance. NYS-50-T-Y Yonkers Withholding Tax Tables and Methods
Philadelphia
Philadelphia’s wage tax is the local tax most likely to sting. As of July 2025 the nonresident wage tax rate is 3.43%, and it applies to anyone earning income in Philadelphia regardless of where they live.10City of Philadelphia. Philly Extends Deadline for Relief Program, Announces Tax Cuts A New York resident working in Philadelphia pays the Philadelphia wage tax, plus PA’s 3.07%, and still owes New York the difference between the New York rate and the combined PA and Philadelphia taxes already paid. The rate changes periodically, so verify the current figure with the city’s revenue department each year.
Other Pennsylvania municipalities levy earned income taxes in roughly the 1% to 2% range and most apply to nonresidents. Check the municipality where you work.
Remote Work and the Convenience of the Employer Rule
Remote work makes this whole picture harder, and the convenience of the employer rule is where cross-border workers get burned. If you work remotely from your home state but your employer is based in the other state, that other state may still tax the income as though you earned it at the employer’s office, unless the remote arrangement exists because the employer requires it rather than because you prefer it.
New York’s regulations require nonresident employees to prove that work performed outside New York was done out of the employer’s necessity, not the employee’s convenience.11Department of Taxation and Finance. TSB-M-06(5)I Convenience of the Employer Test That has historically been a hard standard to meet. Pennsylvania has its own version, and its telework guidance provides that a nonresident employee required to telework full-time from home in another state should treat that compensation as non-Pennsylvania source income.12Commonwealth of Pennsylvania Department of Revenue. Telework Guidance The line between “required” and “choosing” is where the fights happen.
The hardest hit are Pennsylvania residents working from home for New York-based employers. New York may tax your full salary as New York-source income even though you never crossed the state line. You can claim the resident credit on your PA return, but as with any cross-border earner, the credit only offsets the PA portion. You pay New York’s rate on income earned in your living room. If the arrangement genuinely exists for the employer’s benefit — no office space allocated to you, for instance — you may be able to challenge the assessment, but the burden of proof is on you.
Withholding and Estimated Payments
Without reciprocity, your employer typically withholds for the work state. If you live in Pennsylvania and commute to New York, expect New York withholding on your paycheck and no PA withholding. You may need to make PA estimated payments during the year to avoid an underpayment penalty, even if the resident credit will erase most of your PA liability at filing.
If you live in New York and work in Pennsylvania, PA takes 3.07% and New York takes nothing during the year. Since your actual New York rate is higher, you’ll owe a meaningful balance at filing unless you arrange extra withholding or send in estimated payments.
Workers who split time between both states have the messiest situation. Your employer may need to allocate wages by workday location and withhold accordingly. Keep a daily log of where you worked. That log is the strongest evidence you have if either state questions your allocation.
Moving Between the Two States Mid-Year
If you relocate from one state to the other during the year, you file as a part-year resident in each. Each state taxes you as a resident for the months you lived there and as a nonresident for the rest.
Pennsylvania taxes part-year residents on all income earned while they were PA residents, plus any PA-sourced income earned during the nonresident period. Part-year residents are generally not taxed on interest, dividends, capital gains, or gambling winnings from PA sources during the months they lived elsewhere.13Department of Revenue. Nonresidents and Part-Year Residents If your W-2 doesn’t split PA wages between the resident and nonresident periods, you’ll apportion using PA Schedule NRH.
New York does the same, taxing part-year residents on all income during the resident period and on New York-sourced income during the nonresident period, reported on Form IT-203. Timing a move before a large bonus lands can produce real savings, but both states scrutinize the date of a residency change. Expect to document it with a new lease, updated driver’s license, and voter registration.
Dual Residents
A separate problem arises if you qualify as a tax resident of both states at once — say, your permanent home is in one but you keep a residence and spend enough days in the other to trigger statutory residency. Both states participate in the NESTOA agreement, under which the state where earned income is sourced gets first claim to tax it when someone is a dual resident.2Commonwealth of Pennsylvania Department of Revenue. PA Personal Income Tax Guide – Brief Overview and Filing Requirements The resident credit math gets complicated fast in this scenario, and it’s worth paying for professional advice rather than working it out on your own.