I work in Wilmington, Del., but I live in Pennsylvania. My employer takes out state tax and pays it to Delaware. How and where do I file my state taxes? It seems that I pay a lot more to Delaware each year in state taxes than I did to Pennsylvania when I worked there.
As a Pennsylvania resident who works in Delaware, you will need to file two state income tax returns. You will need to file a Delaware return and pay tax on your Delaware-based income. Then you will need to file a Pennsylvania personal income tax return and pay tax on your total income ( which would include your Delaware-based income and any other income from additional sources). You won’t be taxed twice on your Delaware income as Pennsylvania will let you credit some or part of the taxes you paid to Delaware against whatever Pennsylvania income taxes you owe.
For example, assume your Delaware wages are $10,000 and you paid $500 in tax to Delaware. The Pennsylvania tax on that same $10,000 is $307, but Pennsylvania will allow you to calculate a credit based on the $500 you paid to Delaware, and use that credit against what you owe to Pennsylvania. You will use PA Schedules G-R and G-L to calculate the credit.
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Answer By: David M. Lastowski, CPA, is the owner of David M. Lastowski CPA.
***Answer originally published Nov. 1, 2014.