Does Maryland Have Tax Reciprocity With Pennsylvania?

Maryland and Pennsylvania have a reciprocal income tax agreement, which means that if you live in one state and work in the other, you pay state income tax only to your home state on your wages. The agreement covers W-2 compensation only. Business income, rental income, gambling winnings, and independent contractor pay are not protected, and local taxes in both states follow their own rules that can catch commuters off guard.

What the Agreement Actually Covers

The protection applies to compensation for personal services, meaning the wages and salary reported on a W-2.¹ A Pennsylvania resident earning a salary at a Maryland job owes state income tax only to Pennsylvania. A Maryland resident earning wages in Pennsylvania owes state income tax only to Maryland. If your only income from the other state is W-2 wages, you generally don’t need to file an income tax return there at all.

Reciprocity does not turn on automatically. You have to file the right withholding form with your employer, and the form differs depending on which direction you commute.

The Form You File With Your Employer

Pennsylvania Residents Working in Maryland

Complete Maryland Form MW507 (Employee’s Maryland Withholding Exemption Certificate). On the 2026 form, write “EXEMPT” on line 5 to claim exemption from Maryland state income tax withholding.² Line 5 is specifically for Pennsylvania residents. You also need to confirm you do not maintain a place of abode in Maryland, which matters for the 183-day rule discussed below.

Depending on your Pennsylvania jurisdiction, you may also qualify for exemption from Maryland local (county) tax. Line 6 applies if you live in a jurisdiction within York or Adams counties. Line 7 applies if you live in another Pennsylvania jurisdiction that does not impose an earnings or income tax on Maryland residents.² If you qualify for either, also write “EXEMPT” on line 4.

Maryland Residents Working in Pennsylvania

Complete Pennsylvania Form REV-419 (Employee’s Nonwithholding Application Certificate). Check the Maryland box, which both stops Pennsylvania state income tax withholding and authorizes your employer to withhold Maryland income tax instead.³ Pennsylvania recommends completing a new REV-419 each year, or whenever your personal situation changes.

After You Submit

Give the form to your employer’s payroll or HR department. Do it when you start a new job or at the beginning of a new tax year. Then check your next few pay stubs. The work state’s withholding should stop entirely, and your home state’s withholding should appear.

Local and County Taxes Still Apply

This is where commuters get surprised. The reciprocal agreement covers state income tax only. Local taxes in both states run on their own rules.

Maryland Residents Working in Pennsylvania

You are exempt from Pennsylvania’s 3.07% state income tax, but you still owe Pennsylvania local taxes at your work location:

Local Earned Income Tax (EIT). Pennsylvania municipalities and school districts impose this on earned income. As an out-of-state employee, your employer withholds the nonresident EIT rate for the municipality where your worksite is located. Rates vary by municipality.⁴
Local Services Tax (LST). A flat annual tax capped at $52 per year across all municipalities where you work. If your total earned income in the municipality is under $12,000, you are exempt from the LST in jurisdictions that levy more than $10.⁵

Pennsylvania Residents Working in Maryland

Maryland layers a county income tax on top of its state income tax. For 2026, county rates range from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties.⁶ Whether you owe this county tax depends on whether your Pennsylvania home jurisdiction imposes an equivalent tax on Maryland residents. If it does not, or if it exempts that income or allows a credit, you can claim exemption on lines 6 or 7 of the MW507.¹ If you’re not sure whether your jurisdiction qualifies, check with the Comptroller of Maryland or your employer’s payroll department before filing.

Income the Agreement Doesn’t Cover

If you earn money in the other state through anything other than W-2 wages, the state where that income originates can still tax it. Pennsylvania taxes nonresidents on the following types of PA-source income regardless of reciprocity:⁷

Net profit from operating a business, profession, or farm. A Maryland resident running a sole proprietorship in Pennsylvania owes Pennsylvania’s 3.07% flat tax on that profit.⁸
Gambling and lottery winnings from PA sources. Prizes from the Pennsylvania Lottery itself are exempt.⁹
Rent from property located in Pennsylvania.
Independent contractor pay reported on a 1099-NEC rather than a W-2.⁹

Maryland takes the same approach in reverse, taxing nonresidents on Maryland-source income that falls outside the agreement. If you have any of these non-wage income types from the other state, you’ll need to file a nonresident return there. You can then claim a credit on your home-state return for taxes paid to the other state, which prevents double taxation on that same income.

The 183-Day Statutory Residency Trap

The agreement has an exception that can strip its protection entirely. If you are domiciled in Pennsylvania but maintain a place of abode in Maryland for 183 days or more during the tax year, Maryland treats you as a statutory resident. At that point you must file a Maryland resident return reporting all of your income, not just Maryland-source earnings.¹⁰ You would then have to apply to Pennsylvania for a credit to avoid double taxation, rather than relying on the reciprocal agreement.

This matters most for people who rent an apartment or keep a second home in Maryland while claiming Pennsylvania as their domicile. Occasional hotel stays for business don’t trigger statutory residency, but keeping a residence you can return to at any time does.

If Your Employer Withheld Taxes for the Wrong State

If your employer withheld income tax for the work state by mistake, whether because you forgot to submit the exemption form, started mid-year, or the payroll system had an error, you have to file a nonresident return with that state to get the money back.¹¹

To recover Maryland taxes, file Maryland Form 505 (Nonresident Income Tax Return) and indicate your reciprocity status.
To recover Pennsylvania taxes, file Pennsylvania Form PA-40 as a nonresident and claim a refund of the withheld amount.

Both states give you three years from the date the tax was paid to file a refund claim.¹²¹³ Miss that window and you forfeit the refund. File promptly when you spot the error.

Moving Between the Two States Mid-Year

If you relocate from one state to the other during the year, reciprocity applies only for the portion of the year you qualify as a nonresident of the work state. For the months you lived across the border, the agreement shields your wages from the work state’s tax. Once you move, you become a resident of the state where you work, and standard resident taxation takes over.

You will typically file a part-year resident return in both states, splitting your income by the dates you lived in each. Watch the 183-day rule during the transition year. If you kept a home in Maryland for 183 days or more, Maryland may treat you as a statutory resident for the full year.¹ Tell your employer as soon as you move so payroll can update withholding to your new home state.

1
Comptroller of Maryland. Maryland Income Tax Administrative Release No. 3
2
Comptroller of Maryland. 2026 Maryland Form MW507 Employee Withholding Exemption Certificate
3
Commonwealth of Pennsylvania. Employee’s Nonwithholding Application Certificate (REV-419)
4
PA Department of Community & Economic Development. Local Withholding Tax FAQs
5
PA Department of Community & Economic Development. Local Services Tax (LST)
6
Comptroller of Maryland. 2026 Maryland State and Local Income Tax Withholding Information
7
Commonwealth of Pennsylvania. Nonresidents and Part-Year Residents
8
Commonwealth of Pennsylvania. Tax Rates
9
Commonwealth of Pennsylvania. Determining Residency
10
Comptroller of Maryland. 2025 MD MW507 Instructions
11
Maryland Comptroller of Maryland. Personal Tax Tip 56 – When You Live in One State and Work in Another
12
Commonwealth of Pennsylvania. Time Limitations on the Filing of Petitions for Refund (REV-460)
13
Maryland General Assembly. Maryland Code Tax – General 13-1104