Moving to Pennsylvania

A Pennsylvania resident is someone domiciled here, meaning this is the permanent home they intend to return to, or a statutory resident: someone who keeps a permanent place of abode in Pennsylvania and spends more than 183 days of the year in the state. Either one pays 3.07% on all eight classes of income wherever earned. A nonresident pays only on Pennsylvania-source income: wages for work physically done here, a business or rental here, the sale of Pennsylvania real estate, Pennsylvania gambling winnings. A nonresident never pays Pennsylvania tax on interest, dividends or gains on stocks and bonds. The year you change domicile you are a part-year resident, you file the same PA-40 with the part-year oval filled in, and you report everything received while a resident plus Pennsylvania-source income from the rest of the year. The move date is the first day of physical presence in the new home with the intent to stay, and the Department asks for the evidence: the lease or deed, the driver’s license, voter registration, where the family and the furniture went.

Three things make Pennsylvania unusual for people with a foot in two states. It has reciprocity with six neighbors, Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia, covering W-2 wages only, so a commuter pays income tax to the state they live in and nothing to the one they work in. Its credit for tax paid to a non-reciprocal state is capped at 3.07% of the income, which is lower than almost any neighbor’s rate, so the credit usually wipes out the Pennsylvania tax on that income and no more. And its local earned income tax and Philadelphia’s Wage Tax recognize none of these rules; a New Jersey resident working in Philadelphia owes New Jersey income tax and Philadelphia Wage Tax both.

Resident, nonresident, part-year

Two shortcuts in the Department’s rules: a part-year mover who spent fewer than 31 days in Pennsylvania, kept an abode elsewhere all year and never had one here is treated as a nonresident for the whole year; one who was here 183 days or more and had a Pennsylvania abode at any point is treated as a full-year resident.

Domicile is sticky. A Pennsylvanian who takes a two-year assignment in Texas and keeps the house, the license and the intention to come back remains a Pennsylvania resident and owes 3.07% on the Texas salary. Leaving to look for work, with the intention of returning if none is found, does not change domicile. College does not change a student’s domicile, and barracks, a dorm or employer housing for a fixed period is not a permanent abode. For someone with two homes, the Department looks for the place with the “greatest connections”: where the time is spent, where the family lives, where the cars are registered, where the mail and the doctor and the bank are. Changing domicile takes all three of the Department’s elements: evidence of a definite intent to abandon the old home, evidence of a definite intent to make the new one the primary base, and physical presence in an abode there. Snowbirds who spend six months in Florida and keep the Pennsylvania house are full-year Pennsylvania residents, and the test for escaping that is severe: no Pennsylvania abode at all, and no more than 30 days here.

Why it matters more than the 3.07%. Pennsylvania’s inheritance tax follows domicile. A Pennsylvania domiciliary’s whole estate, wherever the assets sit except real estate in another state, is taxed at 4.5% to children and 15% to others, with no exemption. For a retiree with modest income the inheritance tax, not the income tax, is often the real reason the Florida move needs to be done properly.

The year you move: one PA-40, split at the date

A part-year resident files the ordinary PA-40, fills in the part-year oval and the dates, and reports each class of income by period. Wages are split by when they were earned, using the employer’s state wage boxes if the employer split them correctly and a day-count allocation if it did not. Interest and dividends are counted by when they were paid. A capital gain belongs to the period in which the sale closed, which means a stock sold in March by someone who moved here in July is not Pennsylvania’s, and a stock sold in September is, in full. Business and rental income is allocated by books and records or, failing that, by days. Pension and IRA distributions received while a Pennsylvania resident are not taxed anyway, so the split rarely matters for retirees moving in; it matters a great deal for retirees moving out to a state that taxes them, because that state gets the payments from the move date forward.

Two things carry no proration. The 3.07% rate is the same for a resident of one month or twelve. And Tax Forgiveness counts the income earned outside Pennsylvania during the nonresident months as eligibility income, so a mover with a decent salary in the old state will rarely qualify in the move year even if the Pennsylvania months were lean.

Reciprocity: six states, wages only

Pennsylvania’s agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia say that each state will not tax the other’s residents on W-2 compensation earned within its borders. A Pennsylvanian who works in Wilmington, Delaware pays Delaware; one who works in Baltimore pays only Pennsylvania. A New Jersey resident working in King of Prussia owes New Jersey, not Pennsylvania, and gives the Pennsylvania employer Form REV-419 so no Pennsylvania tax is withheld. If Pennsylvania tax was withheld anyway, the fix is a nonresident PA-40 showing zero Pennsylvania compensation to recover it, with the home state’s return filed as usual.

The agreements stop at wages. Self-employment income, a Pennsylvania rental, a Pennsylvania partnership and the sale of Pennsylvania real estate are taxed here regardless of where the owner lives. Compensation earned while a Pennsylvania resident but paid after a move to a reciprocal state is still Pennsylvania’s. And a Pennsylvania resident working in a reciprocal state whose employer withholds only that state’s tax, or none, must tell the employer to withhold Pennsylvania tax or make estimated payments once the unwithheld wages pass $14,000 for 2026, because nothing will have been paid to Pennsylvania by April.

Reciprocity also stops at the city line. The Philadelphia Wage Tax is a city tax, not covered by any state agreement, so a New Jersey commuter working in Philadelphia pays the nonresident rate, 3.43% until June 30, 2026 and 3.425% after, withheld by the employer, and claims a credit for it on the New Jersey return under New Jersey’s rules. Pennsylvania suburbanites working in Philadelphia pay the nonresident Wage Tax too; their home municipality’s earned income tax collector generally credits it against the local tax, and the state gives no credit for it at all.

Working in a non-reciprocal state: the Schedule G-L credit

A Pennsylvania resident who earns income taxed by a state without an agreement, New York and Delaware are the common ones, pays that state as a nonresident and claims a resident credit on Schedule G-L, with a copy of the other state’s return attached. The credit is the lesser of the tax actually paid to the other state and 3.07% of the income taxed by both. Because Pennsylvania’s rate is so low, the credit nearly always equals the full Pennsylvania tax on that income: a Bucks County resident with $100,000 of New York wages pays New York roughly $5,500 (verify), owes Pennsylvania $3,070 on the same wages, and takes a $3,070 credit, so Pennsylvania collects nothing on them and the excess New York tax is simply the cost of working there. The credit is nonrefundable and is applied before Tax Forgiveness. No credit is allowed for tax paid to another state’s cities or counties, for tax paid to a foreign country (ended in 2014), or for wages earned in the six reciprocal states, since those states should not have taxed them. Where several states are involved, the credit is figured state by state on separate Schedules G-L.

The local earned income tax has its own version. Act 32 allows a resident to credit income tax paid to another state against the local tax, but only the part left over after the state credit (verify). In the New York example the leftover is about $2,430, more than enough to cover a 1% local tax of $1,000, so the Bucks County resident owes the local collector nothing either. Philadelphia residents get no such relief against the Wage Tax.

Remote work

Pennsylvania sources compensation to where the services are physically performed. A Pennsylvania resident who works from home for a Maryland or New Jersey company has Pennsylvania wages and nothing else, and the employer, if it is registered here, should withhold 3.07%. A nonresident who works from home in Delaware for a Philadelphia company has no Pennsylvania wages for the days at home, and only Pennsylvania wages for the days in the office, allocated on Schedule NRH if the employer did not split them. The Department has no published “convenience of the employer” rule as of this writing, so days worked at home outside Pennsylvania are not Pennsylvania days.

The hard case runs the other way. New York does have a convenience rule: a Pennsylvania resident employed by a New York firm who works from a home office in Pennsylvania by choice is taxed by New York on those days as if they were worked in Manhattan. Pennsylvania treats the same days as Pennsylvania-source, and whether the Schedule G-L credit covers New York tax on income Pennsylvania regards as its own has not been squarely addressed by the Department (verify). The practical advice is to get the New York employer to document any days New York itself would treat as out-of-state under its own rules, to keep a day log, and to raise the question with the preparer before the year ends rather than after. Philadelphia, for its part, uses a “requirement of employment” test for nonresidents and refunds Wage Tax for days the employer required the employee to work outside the city.

Military

Military orders do not change domicile. A Pennsylvania domiciliary stationed in Georgia remains a Pennsylvania resident, but active-duty pay earned outside Pennsylvania is excluded from Pennsylvania compensation; the service member files a PA-40 reporting other income only and attaches the orders, without which the Department will not process the return. Active-duty pay for service inside Pennsylvania is taxable, except state emergency duty. Combat-zone pay is excluded everywhere and does not count toward Tax Forgiveness eligibility income. A service member from another state stationed in Pennsylvania is not taxed here on military pay under the federal Servicemembers Civil Relief Act, and under the Military Spouses Residency Relief Act the nonmilitary spouse who shares the service member’s domicile and is here only because of the orders keeps the home state too, including for wages earned in Pennsylvania. Military retired pay is exempt for everyone. Details are on the Department’s military page, linked below.

The move-year checklist

• Fix the move date and keep the evidence: closing or lease, license, registration, voter card, utility start dates. The Department’s test is intent plus physical presence, and the burden is on the mover.
• Give the new employer the state and, in Pennsylvania, the Residency Certification Form with the home PSD code, so the local earned income tax is withheld at the right rate from the first check. Moving within Pennsylvania requires the same form.
• If you are leaving Pennsylvania for a non-reciprocal state and keep a Pennsylvania employer, expect Pennsylvania withholding to continue until you tell the employer otherwise; the nonresident PA-40 recovers it.
• If you sold the old house, Pennsylvania excludes the gain on a principal residence in full with the two-of-five-year tests, wherever the house is, and the gain still counts toward Tax Forgiveness eligibility income.
• Time stock sales with the move in mind: gains on intangibles belong to the state of residence on the sale date, and Pennsylvania’s 3.07% with no netting across classes may be better or worse than the other state’s rules.
• If you are moving in from a state that taxes retirement income and planning a Roth conversion, convert after the move. If you are moving out to such a state, convert before.
• File the part-year PA-40 and a part-year local return with the Pennsylvania collector for the resident months; file the old state’s part-year return for the rest.
• Check estimated payments: a mover whose Pennsylvania-period income with no withholding exceeds $14,000 owes quarterly payments from the first due date after the move.
• Update the estate plan. Pennsylvania domicile brings the inheritance tax; leaving it removes the tax on everything but Pennsylvania real estate.