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Lou, Tax Preparer
Category: Tax
Satisfied Customers: 404
Experience:  25+ yrs Experience Personal Income Taxes - Former DM for H&R Block in California
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If I live in PA and work in DE what are income implications?

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If I live in pa and work in Delaware what are the income tax implications? Do I pay Delaware income tax, PA or both?

Submitted: 8 years ago.
Category: Tax
Expert:  Lou replied 8 years ago.

As a resident of Pennsylvania who works in Delaware, you would be required to file a non-resident return with Delaware (Form 200-02). You would be allowed a credit on your Pennsylvania return for taxes imposed by Delaware. Your employer would be required to withhold Delaware taxes as long as you work in Delaware.

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Customer: replied 8 years ago.

I knew that part. De taxes are higher. Would I get a credit for the entire amount of de taxes in pa even if I owe less to PA? It seems that I only pay PA taxes at the end of the day after credits. Is this right?

Expert:  Lou replied 8 years ago.

Do you have any PA income? You have to pay PA income tax on income earned in PA and DE tax on income you earned in DE. As a PA resident you get credit for taxes paid to DE from your PA tax liability. If you had no income in PA then you will still have to file a PA resident return and you will get 100% credit for taxes paid to DE. You will have to file a DE non-resident return and report 100% of your Federal Income and adjustments in Col. 1 Page 2 and your income from DE sources in Col. 2 Page 2.

Each state wants their ‘pound of flesh’ from income earned in that state. Ultimately, you will pay DE tax on income earned there and PA tax on income earned there.

Here are some links to the DE forms you will need:

Customer: replied 8 years ago.

Sorry to be a pain. Maybe an example will help. If my tax liability in DE is 10000 and in PA is 5000. I would get a credit of 10000 on PA taxes and effectively owe 5000. Not sure if my tax credit is PA is only up to my liability.

Expert:  Lou replied 8 years ago.

No problem. We are here to help. You don't get a credit for the total liability but on the taxes actually paid which is usually an amount equal to any withholding from your paychecks.

Box 17 of your W-2 is where you will find the amount of taxes paid to DE. That is the amount for which you will get credit on your PA return.

If my answer is not clear then let me know what are the state taxes you paid to each state (find those amounts in Box 17 of your W-2) I will attempt to be more specific.

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