If you live in Virginia but work in a neighboring state—or vice versa—you may benefit from state income tax reciprocity agreements. These agreements are designed to prevent double taxation on wage and salary income for people who commute across state lines for work.
Tax reciprocity allows residents of one state to avoid paying state income tax to another state where they work. Instead, they only pay income tax to their state of residence. This arrangement simplifies the tax process and reduces the need to file tax returns in multiple states.
Virginia has established tax reciprocity agreements with the following jurisdictions:
These agreements mean that if you are a Virginia resident who works in one of these five states, you do not have to pay income tax to that state. Instead, your employer should withhold Virginia income tax only, provided you file the correct exemption form.
Likewise, if you live in one of the reciprocal states and work in Virginia, you can request to be exempt from Virginia state tax withholding and pay income tax solely to your home state.
Reciprocity agreements apply only to wages and salaries—the income typically reported on a W-2. They do not cover other types of income, such as:
If you earn income from these sources in another state, you may still be required to file a nonresident tax return in that state.
To take advantage of tax reciprocity, you must complete and submit the appropriate exemption form to your employer in the work state. Each state has its own form:
Virginia’s reciprocal tax agreements provide significant relief for cross-border workers. By understanding which states qualify and submitting the necessary paperwork, you can ensure proper withholding and avoid unnecessary tax filings and complications.
Work across state lines? Contact Watter CPA today for expert help with Virginia reciprocity rules and multi-state tax compliance.
