NJ-PA Tax Reciprocity 2026

NJ and PA maintained reciprocity in 2017 when Christie's attempt to end it was reversed. For 2026, the agreement is active in both directions.

Quick answer: Yes, active reciprocity. NJ residents working in PA file NJ-165 with their employer to skip PA withholding; PA residents working in NJ file NJ-165 to skip NJ withholding.

How It Works Both Directions

ScenarioForm To FileResult
Live NJ, work PANJ-165 (to skip PA)No PA withholding. Pay NJ tax only.
Live PA, work NJNJ-165 (to skip NJ)No NJ withholding. Pay PA tax only.

Worked Example

Priya lives in Jersey City, works in Philly, earns $80,000. Without reciprocity: PA withholds ~$2,456 (3.07%), NJ taxes her too and she claims a credit. With reciprocity: she files NJ-165 with her PA employer on day 1. PA withholds $0. NJ withholds ~$3,200 at NJ's graduated rates. She files only an NJ resident return. Net: same total tax, zero nonresident filing hassle.

Step-by-Step: Claim the Exemption

  1. Download the work-state exemption form (NJ-165 Employee Certificate of Nonresidence in New Jersey, issued by NJ Division of Taxation; used in both directions).
  2. Fill in name, SSN, home address (must be in the reciprocity state), and current date.
  3. Submit to HR/payroll at your employer.
  4. Verify on your next paystub that work-state tax withholding is $0.
  5. Update your home-state W-4 to make sure you withhold enough for full income tax.
  6. File only a resident return in your home state next April (unless you have non-wage work-state income).

OBBBA 2026 Note

OBBBA 2026 (One Big Beautiful Bill Act) raised the federal SALT cap to $40,000. This matters for reciprocity commuters who itemize: your full home-state income tax is now more likely to be fully deductible on federal Schedule A, making the state-level tax difference between your home and work state a real after-tax driver of commute value. Check each state rate: NJ top rate 10.75% (over $1M), PA top rate 3.07% flat.

FAQ

Is NJ-PA reciprocity still active in 2026?

Yes. The agreement was reinstated in 2017 after Christie’s 2016 repeal attempt was reversed under public pressure. For 2026 it remains active both directions.

What form do I file for NJ-PA reciprocity?

File form NJ-165 (Employee’s Certificate of Nonresidence in New Jersey) with your employer. The same form is used in both directions: NJ residents working in PA, AND PA residents working in NJ.

Does NJ-PA reciprocity cover Philadelphia city wage tax?

No. Philadelphia City Wage Tax (3.75% resident / 3.44% nonresident for 2025–26) is NOT covered. NJ residents working in Philly still owe the nonresident city tax, though NJ provides a credit for it on the NJ-1040.

What if PA withheld tax before I filed NJ-165?

File a PA-40 NR (nonresident return) for the year showing $0 PA income (exempt under reciprocity) to claim a full refund of PA withholding. Then file NJ-165 now so future paychecks withhold only NJ tax.

Do self-employed NJ residents benefit from reciprocity?

Partial. Reciprocity applies to W-2 wages only. Self-employment income earned from PA sources is taxable in PA via a PA-40 NR. You claim a credit on NJ-1040 for PA tax paid.

Model Your Take-Home

See exact post-reciprocity paycheck with NJ or PA withholding.

Paycheck Calculator →
Other reciprocity pairs:
VA-DC · MD-DC · MD-VA · MD-PA · PA-OH · PA-WV · Full matrix

Tax calculations are estimates for educational and informational purposes only. This site does not provide tax, legal, or financial advice. Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. Data sourced from IRS publications and official state tax authority websites.

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