Work in Maryland, Live in Pennsylvania: How Taxes Work

Reciprocity

Do Maryland and Pennsylvania Have a Tax Reciprocity Agreement?

Yes. Maryland and Pennsylvania maintain a written reciprocal agreement covering wages, salary, and other compensation for personal services. Pennsylvania residents who earn wages in Maryland are exempt from Maryland state income tax on that compensation, and Maryland residents who earn wages in Pennsylvania receive the same protection.

Maryland's Comptroller confirms the agreement in Administrative Release No. 3, listing Pennsylvania alongside Virginia, West Virginia, and the District of Columbia as reciprocal jurisdictions. The PA Department of Revenue lists Maryland among its six reciprocal states: Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia.

The agreement covers compensation subject to employer withholding. It does not extend to self-employment income, rental income, or other non-wage income from Maryland sources. If you earn non-wage income in Maryland, you may need to file Maryland Form 505 as a nonresident for that income separately.

Because reciprocity shields your wages from Maryland state tax, you do not need to file a Maryland nonresident return for wage income alone. This makes the MD-PA crossing simpler than pairings like NY-PA, where no reciprocity exists and both states require returns.

Filing Obligations

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

File only the Pennsylvania PA-40 resident return, reporting all income from every source. No Maryland nonresident return is needed if your only Maryland income is wages covered by reciprocity.

If Maryland state or local taxes were withheld from your pay by mistake, file Maryland Form 505 (nonresident return) to claim a refund. Attach your W-2 showing the Maryland withholding amounts.

If you also have non-wage Maryland income (rental property, business income, or gains from Maryland real estate), file Maryland Form 505 for that income. On your PA-40, use PA Schedule G-L to claim a credit on Line 22 for any Maryland tax paid on non-wage income. This prevents double taxation on the non-wage portion.

Withholding Setup

How Do I Stop Maryland Withholding From My Paycheck?

File Maryland Form MW507 with your employer. On line 5, write EXEMPT to certify that you are domiciled in Pennsylvania and do not maintain a place of abode in Maryland for 183 days or more. This stops Maryland state income tax withholding from your wages.

Your employer should then withhold Pennsylvania income tax at the flat 3.07 percent rate and remit it to the PA Department of Revenue. The PA tax guide states that an employer in a reciprocal state must withhold Pennsylvania personal income tax if the employer has a requirement to do so. Many larger employers with multistate payroll systems handle this routinely.

If your Maryland employer does not have a Pennsylvania withholding account and cannot remit PA tax, you are responsible for making quarterly estimated payments to Pennsylvania using Form PA-40 ES(I).

Verify your pay stub after filing MW507. It should show zero Maryland state withholding. If your employer continues to withhold Maryland tax after you submit the form, follow up with your payroll department. Recovering incorrectly withheld Maryland tax requires filing a Maryland nonresident return at year-end, adding paperwork you can avoid by catching the error early.

County Tax

Am I Still Liable for Maryland County Income Tax?

Possibly. This is the part most PA commuters overlook. The MW507 instructions state that Pennsylvania employees exempt from state withholding under line 5 are still liable for withholding tax at the rate in effect for the Maryland county where they work, unless they qualify for an exemption on line 6 or line 7.

Whether the county tax applies depends on your Pennsylvania locality:

• York and Adams county residents: may claim an exemption from Maryland local withholding tax by completing line 6 of MW507.
• Residents of other PA localities that do not tax Maryland residents: may claim an exemption by completing line 7.
• Residents of PA localities that do tax Maryland residents: remain liable for the Maryland county tax and should file Maryland Form 515 (Nonresident Local Tax Return) at year-end.

Employees who qualify for exemption on line 6 or 7 should also write EXEMPT on line 4 of MW507.

Maryland county income tax rates for 2026 range from 2.25 percent (Worcester County) to 3.30 percent (Dorchester and Kent counties). Most counties charge 3.20 percent. Check the Maryland Comptroller website for current rates, or see our Maryland county income tax rates page.

Statutory Residency

What If I Maintain a Place of Abode in Maryland?

The reciprocity agreement does not protect you if you maintain a place of abode in Maryland for more than six months and are physically present in the state for 183 days or more during the tax year. In that case, Maryland treats you as a statutory resident. You must file a Maryland resident return (Form 502) reporting all income.

You would then apply to Pennsylvania for a credit against the Maryland taxes you paid. Administrative Release No. 3 confirms this 183-day exception applies to residents of Pennsylvania, Virginia, and the District of Columbia. West Virginia's agreement has no such limitation and applies regardless of time spent in Maryland.

A place of abode means a dwelling you maintain, even if you do not always occupy it. A leased apartment or a property you own in Maryland qualifies. Regular commuting across the state line without maintaining a separate Maryland dwelling does not trigger this rule.

Worked Example: PA Resident Earning $100,000 in Maryland

Single filer, all wages earned in Maryland, MW507 line 5 exemption on file, PA flat rate 3.07 percent for 2025 (unchanged for 2026)

Remote Work

What If I Work Remotely From Pennsylvania for a Maryland Employer?

Maryland does not apply a convenience-of-the-employer rule. Days you work from your home in Pennsylvania are Pennsylvania-source income, not Maryland-source income. If you telecommute full-time from PA for a Maryland employer, none of your wages are Maryland-source, and no MW507 is needed because there is nothing to exempt.

For hybrid workers who split time between a Maryland office and a Pennsylvania home, only the days physically worked in Maryland produce Maryland-source wages. Reciprocity exempts those wages from MD state tax. The remote-versus-office split mainly affects Maryland county tax liability (if applicable) and how you allocate income on Form 515.

If your employer is based in Maryland but you work entirely from Pennsylvania, confirm your employer is not withholding Maryland tax by default. Some payroll systems assign the employer's state unless instructed otherwise. A completed MW507 resolves this before any withholding errors occur. Keep a log of your work locations by date in case either state questions the allocation of income between Pennsylvania and Maryland sources.

Mid-Year Move

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

File as a part-year resident in each state. Use PA-40 for the Pennsylvania-resident portion of the year and Maryland Form 505 for the nonresident or part-year period. During the months you lived in Maryland, the state taxes you as a resident on all income. During the months you lived in Pennsylvania, reciprocity shields your Maryland wages from MD state tax.

Update your employer immediately when you move. A PA-to-MD move means you stop claiming the MW507 exemption and begin paying Maryland state and county tax. An MD-to-PA move means you file MW507 to start the exemption and shift your state obligation to Pennsylvania at the 3.07 percent flat rate.

Document the exact date your residence changed. Lease agreements, utility start and stop dates, and a driver's license update help establish the transition date if either state questions the timing.

Local Taxes

Does Pennsylvania Local Earned Income Tax Apply to My Maryland Wages?

Yes. Pennsylvania municipalities levy a local earned income tax (EIT) on resident wages regardless of where those wages are earned. Working in Maryland does not exempt you from your local PA earned income tax. Contact your municipality's tax collector to confirm your local rate and filing schedule.

If you also owe Maryland county tax under Form 515 (because your PA locality taxes Maryland residents), you face local-level tax in both states on the same wages. Some PA local tax collectors allow a partial credit for local taxes paid to another jurisdiction. Check with your collector for credit availability.

The local EIT rate varies by municipality. Most PA localities charge between 1.0 and 2.0 percent, though some townships share the rate between the municipality and the school district. For details on the statewide EIT framework, how collectors are assigned, and which jurisdictions share tax revenue, see our Pennsylvania local earned income tax explainer.