I work out of state and pay income tax to a municipality in that other state. Am I eligible for a credit against my Pennsylvania resident local tax liability?

Yes. Income tax paid to an out-of-state municipality in a non-reciprocal state (for example, to Wilmington, DE) may be applied as a credit toward PA local earned income tax liability. State income tax paid outside PA must first be applied against PA state tax liability. The remaining state income tax credit may be applied against PA local tax liability. Please note that you may not take credit upon tax paid on the same income twice.

In reciprocal states (New Jersey, Maryland, Ohio, West Virginia, Virginia and Indiana) where no income tax is due to the other state, the income tax paid to an out-of-state municipality may be applied directly as a credit toward PA local earned income tax liability.

Keystone’s archivo electrónico calculates out-of-state municipal credits for you. Credit is available only on income subject to tax in both states. Credit may not exceed PA resident local earned income tax liability, be transferred to a spouse, or be applied to next year’s tax liability.