Work in Pennsylvania, Live in New York: How Taxes Work

Reciprocity

Do Pennsylvania and New York have a reciprocity agreement?

No. Pennsylvania has income tax reciprocity agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia. New York is not on that list. This means a New York resident working in PA cannot have the employer skip PA withholding the way a New Jersey resident could.

Without reciprocity, both states have a claim on your wages. Pennsylvania taxes nonresidents on pay for services performed in the state at its flat 3.07% rate. New York taxes its residents on all income, wherever it is earned, at rates from 3.9% to 10.9% for 2026. The credit on your NY return keeps you from paying the full amount to both, but you must prepare and file a return in each state every year.

Filing Requirements

Which returns do I file as a NY resident working in PA?

You file two state returns plus a credit form:

File the Pennsylvania return first. Part 4 of Form IT-112-R asks for information from the return you filed with the other state, so you need the final PA figures, state and local. If the other state's tax later turns out to be different, New York requires an amended return to correct the credit.

Pennsylvania requires a return from a nonresident whose PA gross taxable income is more than $33 for the year, even if no tax is due. You are taxed on compensation for services you perform in Pennsylvania, so the starting point is where you do the work, not where your employer is based (see the convenience rule below). Schedule NRH is needed only when your employer does not report, or incorrectly reports, your PA-taxable pay on your W-2 and you must apportion it yourself.

This filing structure mirrors the reverse commute, where a PA resident working in NY files a NY nonresident return and claims the PA Schedule G-L credit.

Double Taxation Credit

How does the NY resident credit prevent double taxation?

New York taxes you as a resident on all income. Pennsylvania taxes you as a nonresident on PA-source pay. The IT-112-R credit offsets the overlap:

• Figure your Pennsylvania nonresident tax on PA-source pay (PA-40), plus any PA local earned income tax.
• File IT-201 in New York, reporting all income.
• Attach IT-112-R to claim a credit for the income taxes paid to Pennsylvania and its local governments on income also taxed by New York.
• The credit cannot bring your New York State tax below the tax you would owe if that income were left out, so in effect you get the lesser of the PA income taxes or the NY tax on that same income.

At most wage levels the Pennsylvania taxes are the smaller amount. The credit absorbs them, you pay the difference to New York, and your combined state and local income tax comes to about the New York tax alone. Two cases break this pattern. At low wages, roughly below $26,000 with no local tax or below $45,000 with a 1% local earned income tax, Pennsylvania's taxes can exceed the New York tax on the same pay, because New York's standard deduction lowers its tax. In Philadelphia, the 3.07% state tax plus the city's nonresident Wage Tax is more than the New York tax for most earners.

The IT-112-R credit is nonrefundable. It can reduce your NY state tax to zero but cannot generate a refund, so any Pennsylvania tax above the New York limit is a real extra cost.

Withholding

How should my employer handle withholding?

Your Pennsylvania employer must withhold Pennsylvania income tax at 3.07% from pay for work you perform in Pennsylvania, because New York is not a reciprocal state. It also withholds the work-location nonresident earned income tax and the Local Services Tax for your worksite (see the local tax section below). Your W-2 reports these amounts in the state and local boxes, 15 to 20.

New York withholding depends on the employer's ties to New York. An out-of-state employer that is not incorporated or licensed under New York law and does not keep an office or transact business in New York is not required to withhold New York tax. An employer that does keep an office or transact business in New York must withhold New York State tax from a New York resident's wages, even when they are earned outside New York, reduced by the Pennsylvania state and local income tax it is required to withhold.

If your employer withholds only Pennsylvania tax, you may owe a balance to New York at filing time. To avoid a large bill or an underpayment penalty:

• Ask your employer whether it can withhold New York tax. You can request an additional withholding amount on Form IT-2104.
• Otherwise, make quarterly estimated payments to New York using Form IT-2105. They are generally required if you expect to owe at least $300 of New York State tax for 2026 after withholding and credits.
• You generally avoid the penalty if your withholding and estimated payments cover at least 90% of your 2026 tax or 100% of the tax on your 2025 return (110% for higher-income filers).

Remote Work

Does the convenience-of-the-employer rule apply?

Yes, and the rule that matters here is Pennsylvania's. Pennsylvania follows the convenience-of-the-employer doctrine for nonresidents. Its personal income tax guide says pay for services performed by a nonresident cannot be allocated to the place where the work was actually done if it was done there only for the employee's convenience. The regulation at 61 Pa. Code 109.8 allows days worked outside Pennsylvania only for duties that, of necessity, require you to work out of state in the service of your employer.

In practice, if your employer gives you an office or other workplace in Pennsylvania and you choose to work from home in New York some days, those days generally remain Pennsylvania workdays. Only days worked outside Pennsylvania because your employer requires it reduce your Pennsylvania-source pay. The guide has a separate rule for workers whose regular workplace is outside Pennsylvania, so the result depends on your arrangement. Keep a record of where you work each day and why.

New York's own convenience rule applies to nonresidents whose primary office is in New York, so it does not affect you as a New York resident: New York taxes all your income wherever you work. The risk is on the credit side. New York credits income sourced to and taxed by the other state, and days you worked at home in New York that Pennsylvania still taxes may not qualify in full. If you work a hybrid schedule, check with the New York Tax Department or a tax professional before assuming the credit covers those days.

For a deeper look, see our convenience-of-the-employer rule guide.

Example: NY resident earning $90,000 in PA

Single filer, all work performed in Pennsylvania at a worksite with an illustrative 1% nonresident EIT and the $52 LST, NY standard deduction, no NYC tax, tax year 2026 (approximate). With no local tax, the credit would be $2,763 and NY tax after credit $1,508. At a Philadelphia worksite the PA taxes (about $5,848) exceed the $4,271 limit, so NY tax after credit is $0 and the total is about $5,848.

Local Taxes

What about Pennsylvania local earned income tax?

Pennsylvania municipalities levy a local earned income tax (EIT) on wages, and it applies to nonresidents who work there. For an employee who lives out of state, the resident PSD code is 880000 and the total resident EIT rate is 0%, but you still owe the work-location nonresident EIT rate and the Local Services Tax (LST) for your PA worksite municipality.

For nonresidents, the work-location EIT rate is generally limited to 1%. The Department of Community and Economic Development's taxation manual says jurisdictions adopting income taxes under the Local Tax Enabling Act are, in general, limited to one percent, and that nonresidents employed in a home rule municipality are liable for only one percent.

The LST is a flat tax on the privilege of working in a municipality, with a maximum of $52 a year. A municipality that levies more than $10 must exempt people whose total earned income and net profits from all sources within it are less than $12,000.

New York's IT-112-R credit covers income tax paid to a local government within another state, so your PA local EIT counts toward the credit along with the 3.07% state tax. The LST does not count, because it is a flat occupational tax, not an income tax.

Philadelphia has its own Wage Tax instead of the EIT. Nonresidents who work in Philadelphia pay it at 3.43% through June 30, 2026 and at 3.425% from July 1, 2026. Added to the 3.07% state tax, that is more than the New York tax on the same pay for most earners, so part of what you pay in Philadelphia is never credited. See the PA local earned income tax guide for rate lookup tools.

NYC and Yonkers

What if you live in New York City or Yonkers?

If your home is in New York City, you owe the NYC resident income tax on all your income in addition to NY state tax. NYC rates range from 3.078% to 3.876% depending on income. The IT-112-R credit offsets only your NY state tax, not the NYC tax. This means NYC residents who commute to jobs in Pennsylvania carry a meaningfully higher total tax load than suburban NY residents in the same situation, because the city tax sits on top of everything else with no offsetting credit for PA taxes.

If you live in Yonkers, a resident income tax surcharge of 16.75% of your net state tax applies. The IT-112-R credit reduces your state tax first, which in turn reduces the Yonkers surcharge base.

If you live anywhere else in New York State (Westchester, Rockland, Orange, or other counties outside NYC and Yonkers), there is no local income tax on the NY side, and your tax picture is limited to PA state tax, the PA local EIT and LST, and NY state tax.

Mid-Year Moves

What if you moved between PA and NY during the year?

File as a part-year resident in each state. In New York, use Form IT-203 (nonresident and part-year resident return) instead of IT-201. In Pennsylvania, file the PA-40 and fill in the part-year resident oval, even if you had moved away from Pennsylvania by the end of the year.

Each state taxes you as a resident for your period of residence there and applies its source rules to the rest of the year. The credit still applies to income taxed by both states during the overlapping period. Keep records of your move date, since it sets where each period starts and ends.

If you moved from New York to Pennsylvania, your state income tax rate going forward is Pennsylvania's flat 3.07%, which is below every New York bracket. Pennsylvania's local earned income tax still applies, so check the resident rate for your new municipality.

This is general information, not tax advice.