In the state of Virginia, certain employees who are residents of certain other states are exempt from paying income tax on their earnings. The exemptions result from specific agreements, known as reciprocal tax agreements, which make filing tax returns a little bit simpler.

Residents of the District of Columbia, Kentucky, Maryland, Pennsylvania and West Virginia who work in Virginia aren’t required to pay income taxes on wages earned. By simply submitting Form VA-4 to their employer, these workers qualify for the exemption under the reciprocal tax agreements. The taxpayer only has to file one return in their state of residence, and are only required to pay taxes to the home state.

These reciprocal agreements only apply to income earned through employment. That means any other form of income originating from Virginia sources, such as gambling winnings, consulting fees, income from a partnership or LLC, capital gains or interest income, will be subject to taxation at traditional Virginia rates. In these situations, the taxpayer will need to file a return for both their home state and a non-resident tax return for the state of Virginia.

Residents of any other state not covered by Virginia’s reciprocal tax agreements who earn money in the state will also need to file two returns at tax time. The same is true if income tax was mistakenly withheld from a resident in a state that is covered by the reciprocal agreement.