Governor Christie to Keep Reciprocal Income Tax Agreement with Pennsylvania.
On November 22, 2016 Governor Christie announced that he will keep the long-standing agreement between New Jersey and Pennsylvania after all. Due to budget constraints, the governor had initially announced in September that New Jersey was withdrawing from the agreement as of January 1, 2017. By signing a public worker health care bill into law which will result in $200 million in savings for the state, Christie was able to reverse his decision to end reciprocity.
The Reciprocal Agreement, which became effective on January 1, 1978 provides that New Jersey residents who receive wages and salaries from Pennsylvania sources are not subject to Pennsylvania income tax on those earnings, and vice versa for Pennsylvania residents working in New Jersey. This agreement simplifies tax compliance between the states and only requires taxpayers to file one income tax return in their state of residence.