When it comes to legal matters, understanding the terms and specifics of agreements between states can be overwhelming. One such agreement that is essential to those living in New Jersey and New York is the reciprocal agreement.
A reciprocal agreement is a legal agreement between two states that allows taxpayers to pay taxes in the state where they work, rather than where they live. In the case of New Jersey and New York, the reciprocal agreement allows residents of one state who work in the other to pay income taxes only in their home state.
This agreement has been in place since 1977 and applies to both regular wages and self-employment income. It is beneficial for those who work across state lines as it eliminates the need to file taxes in multiple states, which can be time-consuming and expensive.
To qualify for the reciprocal agreement, you must be a resident of either New Jersey or New York and work in the other state. Additionally, you must complete form NJ-165 to notify your employer that you are exempt from New York State income tax.
It is important to note that the reciprocal agreement does not apply to all types of income. For example, if you receive rental income from a property located in New York, you will still need to pay taxes in New York regardless of your residency.
It is also worth mentioning that the reciprocal agreement is subject to change and can be terminated at any time by either state. Therefore, it is important to keep up to date with any changes that may affect your tax situation.
In summary, the reciprocal agreement between New Jersey and New York is a valuable agreement for those who live and work across state lines. By allowing taxpayers to pay income taxes only in their home state, it simplifies the tax process and saves time and money. However, it is important to be aware of the specifics of the agreement and any changes that may occur.