West Virginia Reciprocity Income Tax: What You Need to Know

West Virginia has tax reciprocity agreements with certain states, which affect where state income taxes are owed for those who live in one state but work in another. These agreements prevent double taxation and simplify the filing process for eligible workers.

Understanding which states have agreements with West Virginia and how income is allocated based on residency status can help taxpayers avoid unnecessary filings and payments.

States Covered by Reciprocity

West Virginia has reciprocity agreements with Kentucky, Maryland, Ohio, Pennsylvania, and Virginia. Residents of these states who work in West Virginia are not subject to West Virginia state income tax on their wages. Instead, they pay income tax only to their home state.

For example, an Ohio resident working in West Virginia does not need to file a West Virginia income tax return for wages earned there. They report all their income to Ohio and pay taxes based on Ohio’s rates. This eliminates the need for multiple state tax returns and prevents double taxation. However, these agreements apply only to wages—other income, such as rental earnings or business profits, remains taxable in West Virginia.

To claim this exemption, employees must submit Form WV/IT-104 to their employer, certifying their residency in a reciprocal state. If they fail to do so, West Virginia taxes will be withheld by default, requiring the employee to file a nonresident return to seek a refund.

Income Allocation

While reciprocity agreements exempt wages from West Virginia income tax for qualifying nonresidents, other income types remain taxable. Investment income, business profits, and rental earnings tied to West Virginia properties are subject to state tax, regardless of residency.

Tax obligations for West Virginia-based business earnings depend on how income is categorized. Sole proprietors, partners in a West Virginia partnership, or shareholders in an S corporation conducting business in the state must apportion their income according to West Virginia tax laws. The state typically applies a three-factor formula considering property, payroll, and sales within West Virginia to determine the taxable portion.

Capital gains from selling West Virginia property are also taxable, even for nonresidents. If a nonresident sells a rental property in the state, any profit from that sale is subject to West Virginia income tax. Similarly, royalties from natural resource extraction, such as coal or natural gas, remain taxable in West Virginia, regardless of the recipient’s residency. These income types are not covered under reciprocity agreements and must be reported separately.

Residency vs. Nonresidency

West Virginia determines residency for tax purposes based on domicile, meaning a person’s permanent home. If someone maintains a home in West Virginia and intends to return there whenever absent, they are considered a resident, regardless of time spent in the state.

An individual may also be classified as a statutory resident if they spend more than 183 days in West Virginia within a calendar year. Statutory residents are taxed on all income, including earnings from other states or countries.

Nonresidents are taxed only on income sourced to West Virginia, such as earnings from property, business activities, or services performed in the state. For example, if a nonresident owns a vacation home in West Virginia and rents it out, the rental income is taxable in West Virginia, even if the owner never resides there. Similarly, if a nonresident earns commissions or fees from work performed in West Virginia, those earnings are subject to state tax, even if payment is received while living elsewhere.

Filing Steps

Filing a West Virginia income tax return requires attention to forms, deadlines, and potential deductions. Residents must file Form IT-140, reporting all taxable income, including earnings from other states. If tax was withheld in another state, a credit may be available to offset double taxation, provided the income was not exempt under a reciprocity agreement.

Nonresidents use Form IT-140NR to report only income sourced to West Virginia, ensuring out-of-state earnings remain untaxed by the state.

Workers who had incorrect withholdings due to an unfiled exemption form can recover overpaid taxes by submitting a nonresident return. Supporting documents, such as a W-2 and proof of residency in a reciprocal state, should be included. Refunds are typically processed within eight to twelve weeks, though delays may occur if additional verification is required.