Work in Delaware, Live in Pennsylvania: How Taxes Work

Reciprocity

Do Delaware and Pennsylvania Have a Tax Reciprocity Agreement?

No. Pennsylvania has reciprocal tax agreements with six states: Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia. Delaware is not on this list. Without reciprocity, both states claim a right to tax the same wages. Delaware taxes nonresidents on income earned within the state, and Pennsylvania taxes its residents on all income from every source.

The Delaware-Pennsylvania border sees heavy commuter traffic, particularly between Wilmington and the Philadelphia suburbs. Despite this volume of cross-border workers, neither state has pursued a reciprocity agreement. PA residents with Delaware jobs must file two state returns every year, and Delaware employers must withhold Delaware state income tax from their pay.

Filing Obligations

Which Tax Returns Do I File as a PA Resident Working in Delaware?

File the Delaware nonresident return first. You need the final Delaware tax figure to calculate the credit on your Pennsylvania return. On Form PIT-NON, report only your Delaware-source income. Delaware's graduated rates apply to that income, and the resulting tax flows to the return.

On your Pennsylvania PA-40, report all income from every source. Claim the credit for Delaware taxes paid on Schedule G-L. Attach a copy of your completed Delaware return. Pennsylvania will disallow the credit if you do not include the Delaware return.

Both returns are due April 15. Pennsylvania grants an automatic extension when you file federal Form 4868. Delaware also honors the federal extension.

Resident Credit

How Does the PA Resident Credit Prevent Double Taxation?

Pennsylvania taxes residents on all income at a flat 3.07%. Delaware taxes nonresidents on Delaware-source income at graduated rates from 2.2% to 6.6%. Without a credit, you would owe both states on the same wages. PA Schedule G-L eliminates this overlap.

The credit equals the lesser of:

• The income tax you actually paid to Delaware on your DE-source wages, or
• The Pennsylvania tax on that same income (3.07% of those wages)

For earners above $60,000 in Delaware-source wages, Delaware's top rate of 6.6% is more than double Pennsylvania's 3.07%. In this range, the credit equals your full PA tax on those wages, and your net PA state liability is zero. Your total state income tax equals whatever Delaware charged.

If your Delaware wages fall entirely in the lower brackets where the effective Delaware rate is below 3.07%, you may owe a small balance to Pennsylvania after applying the credit. On $5,000 of Delaware-source income, the Delaware effective rate is about 1.32%, which is below PA's 3.07%. The credit is limited to the Delaware tax, and you owe PA the difference.

If you have Pennsylvania-source income not taxed by Delaware, such as rental income from Pennsylvania property, that income is taxed only by Pennsylvania and does not factor into the credit calculation.

Employer Withholding

How Should My Delaware Employer Handle Withholding?

Your Delaware employer withholds Delaware state income tax based on the graduated rate schedule. This is required for all employees performing services in Delaware, regardless of where they live. The employer does not withhold Pennsylvania state tax.

Because only Delaware tax is withheld, your PA-40 return may show a balance due or a refund at the state level. For most earners above $60,000, the Schedule G-L credit covers your entire PA state tax on those wages, so you owe nothing additional to Pennsylvania. If your wages fall in lower DE brackets where the effective rate is under 3.07%, you may owe a small PA balance.

Pennsylvania does not have a reciprocity exemption certificate for Delaware. You cannot ask your Delaware employer to withhold PA tax instead. Reconcile your Pennsylvania obligation at filing time using the Schedule G-L credit.

Local Wage Tax

Does the Wilmington City Wage Tax Apply to PA Commuters?

Yes. The City of Wilmington imposes a 1.25% wage tax on earned income. This rate is set by the Delaware General Assembly and applies to both Wilmington residents and nonresidents who work within city limits. If your Delaware job is located in Wilmington, your employer withholds this tax from your pay and remits it to the city.

The Wilmington wage tax is separate from Delaware state income tax. It is not credited on your PA-40 because PA Schedule G-L covers only state income taxes paid to another state, not local or city taxes. The 1.25% is an additional cost for PA commuters working in Wilmington on top of Delaware's state rate.

Wilmington is the only municipality in Delaware that levies a local earned income tax. If your Delaware job is outside Wilmington, in cities like Newark or Dover, you face only the state-level tax with no local layer on the Delaware side.

Worked Example: PA Resident Earning $80,000 in Wilmington, DE

Single filer, all wages from Wilmington employer, 2025 DE brackets and PA flat rate applied before exemptions. PA local EIT not included.

Remote Work

What If I Work Remotely from Pennsylvania for a Delaware Employer?

Neither Delaware nor Pennsylvania applies a convenience of the employer rule. Delaware taxes nonresidents only on income for services physically performed within the state. Days you work from your Pennsylvania home are Pennsylvania-source income, not Delaware-source income.

If you split your workweek between both states, allocate your wages based on the number of days worked in each location. Report only the Delaware portion on Form PIT-NON. The Pennsylvania portion is taxed only by Pennsylvania at 3.07%, with no Delaware credit needed on those dollars.

Tracking workdays by state matters financially. With Delaware's top rate at 6.6% and Pennsylvania's at 3.07%, each day shifted from Delaware to Pennsylvania lowers the effective rate on that day's wages by up to 3.53 percentage points. Keep a daily log or calendar showing where you worked, as both states may request documentation during a review.

For workers with a formal hybrid schedule, ask your employer to document the arrangement. A written remote work agreement strengthens your position if either state questions the allocation of workdays.

PA Local Tax

Do I Owe Pennsylvania Local Earned Income Tax on Delaware Wages?

Yes. Pennsylvania residents owe local earned income tax (EIT) to their municipality of residence, and this applies to all earned income, including wages from out-of-state jobs. Your Delaware employer is not required to withhold Pennsylvania local EIT from your pay. Most out-of-state employers do not.

Because no one withholds the local EIT, you are responsible for paying it directly. File an annual local earned income tax return with your municipality's tax collector. Some municipalities require quarterly estimated payments if your expected balance exceeds a threshold. The local EIT rate varies by municipality, set through the Political Subdivision Code (PSD) system administered by the Department of Community and Economic Development.

The PA local EIT cannot be offset by Delaware taxes paid. It is a separate obligation from the state-level credit on Schedule G-L. This catches many cross-border workers off guard: the state credit covers your PA state tax, but the local EIT remains as an additional cost with no offsetting credit for Delaware or Wilmington taxes. For more on PA local tax rates, see our Pennsylvania local earned income tax guide.

Mid-Year Move

What If I Moved Between Delaware and Pennsylvania During the Year?

If you changed your permanent residence between Delaware and Pennsylvania during the year, file as a part-year resident in each state. Use Delaware Form PIT-NON for the nonresident or part-year period. Use Pennsylvania PA-40 and mark the part-year oval.

During months you lived in Pennsylvania and worked in Delaware, the credit mechanism described above applies. During any months you lived in Delaware, you file as a Delaware resident on all income, and Pennsylvania taxes only your PA-source income for that period.

Document your exact move date. Utility activation records, lease or mortgage dates, and driver's license changes serve as evidence. Both states require you to identify the date your residency changed, and each state's claim to your income depends on which days you were a resident.

Withholding Errors

What If My Employer Withheld for the Wrong State?

If your Delaware employer mistakenly withheld Pennsylvania tax instead of Delaware tax, you will owe Delaware the full amount when you file Form PIT-NON. Claim the incorrectly withheld Pennsylvania amount as a payment on your PA-40, and Pennsylvania will apply it to your liability or refund the overpayment.

A more common problem is an employer withholding no state tax at all, caused by a payroll setup error. If nothing was withheld, you owe Delaware when you file and may face underpayment penalties. Set up estimated payments for future quarters to avoid repeating the shortfall.

To prevent ongoing issues, confirm that your employer's payroll system is set up to withhold Delaware income tax for your work location. Check your first pay stub of the year to verify that Delaware withholding appears on the state tax line.