State tax reciprocity agreements

If you live in one state and work in another, two states can both have a claim on your wages. Some pairs of states have agreed not to do that. You pay where you live, and you hand your employer one form to stop the other state taking anything. Half of these deals save you money. The other half save you a second tax return, which is often what people wanted anyway.

Reciprocal agreements assign taxing rights over wage income to the state of residence, relieving the employee of nonresident filing in the work state and permitting an exemption from withholding there. ⚠️ The benefit is the differential between the two states' liabilities, not the work state's gross charge: absent an agreement the resident state credits tax paid elsewhere, limited to its own liability on that income, so the counterfactual total is approximately the greater of the two. Where the home state is the dearer, the agreement's value is procedural rather than pecuniary.