It's variable by state and by township, but in general any vegetation that crosses an ownership boundary can be cut by the person on that side of the boundary. Your neighbor can cut the tree all the way back to the imaginary vertical line created by the property line. If it kills YOUR tree -- that's too bad for you. You should have trimmed it before it started crossing the boarder.
On the other side of the equation, if HE notices that a limb from YOUR tree is over his house and DOES NOT cut it -- he is screwed if it falls on his house. NOT you. (But that is variable by state, etc -- check on it). Once a dangerous condition is identified, HE has a duty to protect his investment -- not you. I would send a letter by certified mail with signature required. Video tape the letter and it being put in the envelop and showing that it was sent. In the letter tell him that you understand from his conversation that he is concerned about a limb that crosses the property line. Tell him that after it has crossed the line it is out of your control, but that he has every legal right to trim it back to the line -- even if it kills the tree.
Because he seems to be a peckerwood, I would also include in the letter that if he agrees that any incidental damage from the actions of removing the tree with limbs over his deck will be covered by him and not you - then you will be a good neighbor and pay to take out that tree.
Guaranteed* advice from "the law office of Dewey, Cheetam & Howe".**
*Guaranteed to be advice -- not correct, good or even sound.
** The name of a fictional "Three Stooges" law office -- not a real law office. I am not a lawyer, don't play a lawyer on television and didn't even sleep at a Holiday Inn last night. Always see a real lawyer for real legal advice!
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