Reciprocal agreements let workers pay income tax only in their state of residence. Only 16 states plus D.C. maintain them — and that number has not changed since November 2022.
States have long used reciprocal tax agreements to help minimize the burden of double taxation for individuals who live in one state and earn income in another. Under these agreements, taxpayers are generally only subject to income tax in their state of residence, rather than being taxed by both the residence and work states.
In situations where reciprocity does not apply, individuals must typically file tax returns in multiple states and rely on credits to offset double taxation — a process that increases administrative complexity and may not fully eliminate additional tax liability (Wilford). Although these agreements have existed for many years, the rapid expansion of remote work has intensified the challenges associated with multistate taxation.
Prior to the COVID-19 pandemic, roughly 5.8 million Americans worked outside their state of residence. By 2021, approximately 27.6 million individuals were working primarily from home, signaling a significant shift in workforce dynamics (Walczak). In response, states and policymakers are increasingly examining and updating their tax systems — including reconsidering the scope and application of reciprocity agreements — to better reflect the realities of a more geographically flexible labor force.
Sixteen states plus D.C. maintain active reciprocal income tax agreements. This number has remained unchanged since November 2022, as states chose either to adopt such arrangements or to continue the same agreements they had with other states prior to the COVID-19 pandemic.