Tax Implications for Living in Pennsylvania and Working in Delaware

When you live and work in Pennsylvania, your state income taxes are automatically withheld from your paycheck. Pennsylvania has reciprocal tax agreements with some states that allow residents to work out of state and still have Pennsylvania taxes withheld. Delaware is not one of these states.

What’s on Your Paycheck

When you work in Delaware, your paycheck will not show Pennsylvania taxes being withheld. Instead, you will see taxes for Delaware being withheld from your paycheck. It makes no difference that you live in Pennsylvania because the taxes are taken out for the state in which you work.

What about Pennsylvania Taxes?

Despite having to pay taxes in Delaware, you are still liable for state tax in Pennsylvania. However, you do get a credit for paying local taxes in another state. The amount of the credit that you get to claim varies. To determine the amount of your credit, you must complete PA Schedule G-S. You can find this on the Pennsylvania Department Of Revenue website (portal.state.pa.us), but you need to have a record of the amount of income you made for the tax year, as well as how much you paid in taxes to Delaware.

Delaware Filing Requirements

You are required to file a nonresident tax return with the state of Delaware. To do this, you must complete form 200-02, which is the nonresident tax return for Delaware. You can download this form from the Delaware Department of Revenue website (delaware.gov). The address where you send the completed form is listed on the bottom of the form. The address varies depending on your tax outcome.

Pennsylvania Filing Requirements

When you are ready to file your Pennsylvania income tax return, you need to have a signed copy of your Delaware nonresident tax return to submit with it. You must also include the PA Schedule G-S form or the PA Schedule G-L form with the PA Schedule G-R form. The Pennsylvania resident tax return form is the PA-40 form. You can download all appropriate forms from the Pennsylvania Department of Revenue website.

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