Should I make my income taxable in PA if I work in PA but live in NJ?

[DanielV01 · Accepted solution]

No, you should not.  In fact, if no PA income tax was withheld, you do not need to file a PA tax return at all.  NJ and PA are reciprocal states:  they agree that you only pay tax in the state you live (NJ) and not where you work (PA).  If PA state tax was mistakenly withheld, you then file a PA nonresident return and select the option "make this income non-taxable in PA".  This way you receive a full refund of PA taxes withheld (but you will pay state NJ taxes instead.

If PA local taxes are withheld (for example, Philadelphia), please comment this.  There is a credit you can claim on your NJ resident return for local taxes you pay to PA.  Those are not a part of the reciprocal agreement, but NJ will allow you to use them to reduce NJ tax on your income if you paid them.