New Jersey-Pennsylvania Reciprocal Agreement on Thin Ice
The Christie Administration has taken steps toward ending the 39-year-old reciprocal agreement that New Jersey maintains with Pennsylvania. Under the agreement, Pennsylvania residents who work in New Jersey are not subject to New Jersey withholding tax and pay income tax solely in their state of residence. Similarly, New Jersey residents working in Pennsylvania are not subject to PA withholding.
The end of the reciprocal agreement, scheduled for January 1, 2017, would mean a significant increase in taxes for many commuters.
The change on the part of the governor’s office is an attempt to balance the state budget. An estimated $180 million in non-resident tax revenue is lost annually as a result of the reciprocal agreement. Christie stated that he will reconsider ending the agreement if the Democrat-controlled NJ legislature reduces the cost of public employee health insurance.
At Viventium, we are committed to helping you with the increased compliance requirements that have resulted from rapidly evolving legislation. We aim to minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits so that you can focus on the work that matters: running your business. We provide you with this information as a way to amplify your understanding of the impact of regulatory requirements – but please do not construe this information as tax or legal advice. By nature, this information is subject to revision and might not be the most up-to-date information available. We encourage you to consult with the appropriate legal and tax advisors before making any decisions.
Topics: New Jersey, Pennsylvania