It’s 135 days until graduation, which means I need to start thinking about gainful employment thereafter. For a number of reasons, I’m looking at jobs in Washington, DC, which is the closest city with the kind of jobs that I want. (Yeah, I know I’m insane, but that’s not exactly news.)
My question is this: Does Pennsylvania, where I live, have any kind of taxing authority on income earned outside the state? Would I be responsible to the District of Columbia for income taxes?
Thanks,
Robin
I can’t answer specifically, but I’d say yes.
I live in NH, which has no income tax. It gathers it’s income from property taxes (a portion of the local property tax goes to the state), tolls, business taxes, and meal/hotel taxes, and of course fees.
I currently work in NH, so I pay no income taxes to the state. I of course pay federal income taxes.
When I worked in Mass, I paid the same 5.75% (slightly lower now) rate as instate residents. (I got no vote, so I was taxed without representation, but that’s a whole different thread). I could only be taxed by MA on the portion of my income earned in MA.
MA residents follow the same rule if they are earning an income in NH. They pay their home state first, and in this case, since NH has no income tax, they pay the entire 5.75% to MA.
As I understand it, if NH had an income tax, and it was (for example) 3%, I’d have paid the first 3% to NH, and the remaining 2.75% to the Peoples Republic of MA (also called the Commonwealth of MA). Since I don’t actually follow this rule, I’m not 100% sure that this is fact.
Hope this helps…
-Butler
I’m pretty sure that Maryland and PA do not tax each other in that way. As a matter of fact Mass may be the only place that does do something like that. My father works in DC, lives in Maryland and I’ve never heard him complain of being taxed for DC as well as Maryland, and believe me I’d have heard about it if he had.
What kind of job are you looking for that you’d be willing to come all that way?
I want to work in radio news. The Voice of America, NPR, and C-Span are all in DC.
Basically, aside from a hellish commute, I get the benefit of a good job, a DC paycheck, and a PA cost of living.
Robin
New York State certainly does. There are some horror stories of people double- (and in one case triple-) taxed for having the temerity to earn money in New York City while residing in the Garden or Nutmeg States. (No doubt Eve has some notes in this regard.)
I spent about 7 years working in Virginia but living in North Carolina. Virginia collected state income tax withholding from my paycheck every month, but at the end of the year I owed North Carolina state income tax on my income, because that was where I was a resident.
The good news, is that I could file in both states and get a full credit/refund for all the money paid to Virginia. The bad news is that NC had higher state tax rates than VA, so I always ended up owing more to NC than VA withheld during the year.
So, at least for North Carolina the answer is you WILL owe state tax on income you earned in another state. I expect most states work this way, if they collect state income tax at all.
Jammer
My mom lives in York County (Pennsylvania) and works outside of Baltimore (Maryland). Her employer takes out state taxes from her paycheck and mails them to Pennsylvania, as well as her local taxes, etc., just like she would be working in PA.
A slight hijack…I had a friend who lived in York County, and worked in DC. Her commute (without traffic difficulities) was about 90 minutes one way. She did this for a few months, until her husband was in a serious vehicle accident in Hershey, PA (which is about 90 minutes from their HOUSE and in the opposite direction from DC). As she was coming home (after getting a phone call from the hospital), she encountered DC traffic, which put her commute (on that day) to over four hours.
She quit the following week and now works less than 20 minutes from her home.
The commuting distance is part of it. I found out there is a MARC station in Frederick and a commuter bus that leaves Hagerstown. I’ve worked in enough large cities not to want to mess with traffic. Were it not for public transit, I’d think longer and harder about this.
Robin
If you were a full time resident of PA, DC would not tax your paycheck. My presumption is that PA would require you to pay the appropriate tax.
I live in PA and work in MD. I do not pay taxes to MD but I do pay to PA. Where I work now the taxes are already taken out of my paycheck for PA. If the company you work for doesn’t automatically take out your PA state taxes you’ll have to file estimated taxes quarterly. The company I work for does not take out local taxes. I have to pay those myself.
I used to commute to Columbia MD every day and I thought that was bad enough. If you are willing to commute from PA to DC every day then you just might be insane enough to work in DC. 
The situation you describe is actually very common in the Washington area. Many people who work in Washington live in the nearby (and no-so-nearby) suburbs of Maryland and Virginia. The good news is that Congress specifically forbids the District of Columbia government from levying income tax on people working in the district but living outside it. When you start a job in D.C., your employer gives you three tax withholding forms (D.C., Maryland, and Virginia) and you return only the one for the jurisdiction you live in. If you’re going to be living in Pennsylvania, someone’s going to have to get the appropriate Pennsylvania form.
By the way, the relevant term is “commuter tax,” which is levied by many city governments on people who work in the city but live outside its limits. As I said, Congress specifically prohibits the District of Columbia from imposing a commuter tax.
I would think twice about taking the train from Frederick. It’s about a 90 minute ride on a good day, on days that the temps are above 90 they have heat restrictions, that can easily add twenty or more minutes to the trip one way. I’m also not sure if they have parking in Frederick for the train, and if they do it’s limited. They have busses from Walkersville, but I understand they take 20 minutes. I’m not trying to say don’t take the train, but be prepaired to spend 4 hours or more a day traveling from PA.
I never knew so many states took out taxes for working there. I know I would hate it if they did it to me.
I’m glad I put the disclaimer in my case above!
FWIW, Maine does the same thing to NH residents as MA does. We see this a lot with the Portsmouth Shipyard employees (actually located in Kittery ME).
I wish congress would extend that rule about DC to the 50 states!
-Butler
Some states have what is known as reciprocity. Wisconsin and Minnesota are an example. If the state you work in and the state you live in have this arrangement, you can get a refund on all of the taxes withheld from the state you work in and pay taxes solely in the state you live in. Naturally, this can lend itself to a bit of abuse, where people claim they live in a state that has lower (or no) state income taxes when all they may have is a vacation home there.
Leaving from Frederick is choice #2. Hagerstown, by comparison, is about half the drive on better roads.
Robin