Question 51 of 75. Which of the following best defines a reciprocal agreement for state tax purposes? It is an agreement between: Two states that allow residents of one state to work in another state while paying income taxes only to the state in which they work. The agreement only applies to earned income. Other income, such as rental income or lottery winnings, is not covered under a reciprocal agreement Three or more states that allow residents of one state to work in another state while paying income taxes only to their state of residency. The agreement covers earned income as well as rental income, pension, lottery winnings, etc. Bordering states that determines the threshold at which a taxpayer should file a return in the state in which they work and the state in which they live. Reciprocal agreements only apply to earned income. Two states that allow residents of one state to work in another state while paying income taxes only to their state of residency. The agreement only covers earned income. Other income, such as rental income, pension, lottery winnings, etc., is not covered under a reciprocal agreement