How do I receive local credit for income tax paid to another state?

Your out-of-state credit is determined to be the lesser of (1) the remaining tax after application to your Pennsylvania state level income tax liability and (2) the local earned income tax liability of your out-of-state taxed income.

No credit is given for income tax paid to states that reciprocate with the Commonwealth of Pennsylvania. For instance, if you work in and pay state tax to the state of New Jersey, you cannot apply credit for the New Jersey state tax against your home municipality’s local tax. To recover tax paid to a reciprocating state you must apply to that state for a refund. Reciprocal states include: Maryland, New Jersey, Ohio, Virginia, West Virginia and Indiana. NOTE: This restriction does not apply to income taxes paid on net profits. No credit is allowed for tax paid outside of the United States. To assist you in computing your out-of-state credit, access the Local Earned Income Tax Return form and refer to LINE 12: OUT-OF-STATE TAX CREDIT WORKSHEET. Alternatively, Keystone’s e-file calculates out-of-state credits for you.