Live in Pennsylvania, Work in New Jersey: Which State Taxes Your Paycheck?
Answer
File Form NJ-165 and New Jersey takes nothing. Under the reciprocal agreement between Pennsylvania and New Jersey, wages you earn in New Jersey are taxable only by Pennsylvania. The certificate goes to your employer rather than to a revenue department, and it turns two potential returns into one.
Last verified
A reciprocity agreement is a deal between two revenue departments about which of them withholds. Around thirty such agreements exist across sixteen jurisdictions, and Pennsylvania and New Jersey hold one — which is why this commute produces one return instead of two.
New Jersey's single reciprocal agreement is with Pennsylvania. A Pennsylvania resident working in New Jersey files Form NJ-165, Employee's Certificate of Nonresidence in New Jersey, with the employer. Note the direction filers get wrong: the form belongs to the state where the work is, so the Pennsylvania resident files a New Jersey form.
The certificate goes to your employer's payroll department, not to New Jersey Division of Taxation, and it is not retroactive — filing it in June does not recover New Jersey tax withheld in January. That money comes back only by filing a New Jersey nonresident return for the year and claiming a refund.
What you file
- 1Give to your employer · New JerseyForm NJ-165
Give your employer Form NJ-165 so New Jersey stops withholding. This goes to the employer, not to New Jersey Division of Taxation — and it is not retroactive, so file it before the first paycheck of the year.
- 2Resident return · Pennsylvania
File a Pennsylvania resident return reporting all of your income, including the wages earned in New Jersey.
The two states, side by side
| Pennsylvania | New Jersey | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — graduated |
| Reciprocity partners | 6 (Form REV-419) | 1 (Form NJ-165) |
| Convenience rule | Yes — general rule | Only against convenience-rule states |
| Nonresident return | Form PA-40 (nonresident) | Form NJ-1040NR |
| Credit for other-state tax | Schedule G-L | Schedule NJ-COJ |
| Nonresident safe harbour | None published | None published |
| Local income tax | Yes | No |
| Revenue department | Pennsylvania Department of Revenue | New Jersey Division of Taxation |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in New Jersey and working in Pennsylvania gives:Reciprocal agreement — file the exemption form.
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.
- Remote worker: Pennsylvania → New JerseyHome state only
- 1099 contractor: Pennsylvania → New JerseyHome state, plus the client state if you work there
- Moved mid-year: Pennsylvania → New JerseyTwo part-year returns
Other Pennsylvania pairs
Questions people actually ask
I live in Pennsylvania and work in New Jersey. Which state takes the tax out of my paycheck?
File Form NJ-165 and New Jersey takes nothing. Under the reciprocal agreement between Pennsylvania and New Jersey, wages you earn in New Jersey are taxable only by Pennsylvania. The certificate goes to your employer rather than to a revenue department, and it turns two potential returns into one.
Which state should my employer be withholding for?
Pennsylvania. Your employer should withhold Pennsylvania tax rather than New Jersey tax on these wages, but only once you have given payroll Form NJ-165 — the exemption is not automatic and it does not apply retroactively. If a New Jersey line is showing on your pay stub, raise it with payroll now rather than at filing time.
What if New Jersey tax was already withheld from my pay?
File Form NJ-165 with your employer to stop it going forward, then recover what was already taken by filing a New Jersey nonresident return for that year and claiming a refund of the full amount. Pennsylvania will still expect its own tax on the same wages, so do not treat the refund as a windfall.
How current is this?
The Pennsylvania and New Jersey rules on this page were last checked against Pennsylvania Department of Revenue and New Jersey Division of Taxation 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.
- 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
- New Jersey Division of Taxation — individual income taxaccessed 2026-08-07
- New Jersey Division of Taxation — Convenience of the Employer Ruleaccessed 2026-08-07