PA State Deductions as PA resident working in NJ

[ihaveataxquestion2025]

I am a PA resident working in NJ. My employer sends me 2 W-2 forms.

The NJ W-2 shows all of my Federal deduction data.

The PA W-2 only shows my gross income amount and a withheld tax amount based on the total gross. I know you cannot deduct health insurance cost for PA state taxes. However, the PA-40 instructions seem to indicate I can deduct my HSA contributions (Box 12 code W on my NJ W-2). Turbotax hasn't ever deducted it for me, and I cannot figure out why. I think it's due to the split reporting on my W-2's.

Can I deduct my HSA from PA State Taxes as a PA resident working in NJ? Are there any other typical deductions I could apply to it?

[NicolleR1]

Yes, you can deduct your HSA contributions on your PA state return, because of the agreement between Pennsylvania and New Jersey.  You only pay income tax to PA on your wages.

So as a Pennsylvania resident working in NJ, you can deduct your HSA contributions from your PA state taxes.

However, if your HSA contributions are shown on your W-2, Box 12, code W, they are already deducted from your taxable wages. That means that you can't deduct HSA contributions that are shown on your W-2 because they were already taken out of your paycheck before taxes.

In other words, these contributions are already excluded from your income, so claiming them again would count twice.

To see any other deductions you could apply, or to get more information about your HSA contributions, refer to the link below:

PA/NJ Reciprocal Income Tax Agreement