Live in Montana, Work Remotely for a Pennsylvania Employer: Who Taxes You?
Answer
Both states claim these wages, and the reason is Pennsylvania's convenience rule. Working from home in Montana would normally end Pennsylvania's interest; instead Pennsylvania treats days worked at home for your own convenience as Pennsylvania days. Expect two returns and a credit that may not fully cover the gap.
Last verified
A handful of states refuse to accept the ordinary sourcing rule for their own employers' remote staff. Pennsylvania is one of them, and its convenience-of-the-employer rule is the reason this page does not end with "only your home state taxes you".
Pennsylvania sources a nonresident's remote workdays to Pennsylvania when the employee works from home for their own convenience rather than at the employer's requirement. The reciprocal agreements override it: a New Jersey resident working remotely for a Pennsylvania employer owes Pennsylvania nothing.
The rule is not an administrative preference. Pennsylvania applies it under 61 Pa. Code §109.8, and the burden of showing that remote work is an employer necessity rather than an employee convenience falls on you and your employer, not on Pennsylvania Department of Revenue.
A Montana resident taxed by another state on the same income claims the credit for taxes paid to other states on Form 2 (credit for income tax paid to another state). The credit is capped at the Montana tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
Pennsylvania also has a layer below the state one, and it is the layer that survives every agreement: Pennsylvania's Act 32 earned income tax is levied by municipalities and school districts across the state, and Philadelphia levies its own wage tax on residents and on nonresidents who work in the city. None of it is covered by the reciprocal agreements, and Philadelphia's nonresident wage tax applies from the first dollar.
What you file
- 1Nonresident return · PennsylvaniaForm PA-40 (nonresident)
File the Pennsylvania nonresident return FIRST — you need the Pennsylvania tax figure before you can complete Montana.
- 2Resident return · MontanaForm 2 (credit for income tax paid to another state)
File a Montana resident return reporting all income, then claim the credit for tax paid to Pennsylvania. The credit is capped at what Montana would have charged on that same income, so if Pennsylvania taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Montana | Pennsylvania | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — flat |
| Reciprocity partners | 1 (Form MW-4) | 6 (Form REV-419) |
| Convenience rule | No | Yes — general rule |
| Nonresident return | Form 2 with the nonresident/part-year schedule | Form PA-40 (nonresident) |
| Credit for other-state tax | Form 2 (credit for income tax paid to another state) | Schedule G-L |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | Montana Department of Revenue | Pennsylvania Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Pennsylvania and working in Montana gives:Home state only.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- W-2 commuter: Montana → PennsylvaniaBoth states — credit offsets the double tax
- 1099 contractor: Montana → PennsylvaniaHome state, plus the client state if you work there
- Moved mid-year: Montana → PennsylvaniaTwo part-year returns
Other Montana pairs
Questions people actually ask
I live in Montana and work remotely for a Pennsylvania employer. Which state do I pay?
Both states claim these wages, and the reason is Pennsylvania's convenience rule. Working from home in Montana would normally end Pennsylvania's interest; instead Pennsylvania treats days worked at home for your own convenience as Pennsylvania days. Expect two returns and a credit that may not fully cover the gap.
Which state should my employer be withholding for?
Both, potentially — and that is the problem. Pennsylvania expects withholding because it claims the income, while Montana taxes you as a resident. Many employers withhold only for Pennsylvania, which leaves a Montana balance due at filing unless you make estimated payments during the year.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. Montana gives residents a credit for tax paid to Pennsylvania on the same income, claimed on Form 2 (credit for income tax paid to another state). The credit is capped at the Montana tax on that income, so if Pennsylvania taxes it more heavily the excess is not refunded by either state.
How current is this?
The Montana and Pennsylvania rules on this page were last checked against Montana Department of Revenue and Pennsylvania Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Montana Department of Revenue — individual income taxaccessed 2026-08-07
- Pennsylvania Department of Revenue — individual income taxaccessed 2026-08-07
- Pennsylvania — Form REV-419accessed 2026-08-07
- Pennsylvania Personal Income Tax Guide — Income Subject to Tax Withholdingaccessed 2026-08-07