Reciprocity state pair

Live in Indiana, work in Kentucky

A qualifying full-year Indiana resident’s Kentucky wages are exempt from Kentucky state income tax under reciprocity. Indiana resident state and county tax and Kentucky occupational tax may still apply.

By Abu HasnatPage updated Nov 7, 2026Data: Indiana and Kentucky revenue departments (methodology)

Choose your next step

Payroll starting point: Kentucky 2026 K-4: reciprocity exemption (opens in new tab). Complete the reciprocal-state worksheet and check box 4 on Kentucky’s 2026 K-4; give it to your Kentucky employer. Arrange Indiana withholding and check the workplace’s occupational tax.

Official tax guidance for both states

Check withholding, filing requirements and current forms with each state's tax agency.

Indiana: Indiana Department of Revenue (opens in new tab)
Kentucky: Kentucky Department of Revenue (opens in new tab)

Agency directory checked 2026-10-01 against the IRS state-government directory. This verifies the agency links, not an individual tax result. Use forms for the year you are filing.

Before you use this estimate

This model assumes a full-year resident of Indiana, ordinary employee wages and all workdays physically in Kentucky. Check exemption eligibility before treating a work-state amount of $0 as your own result. Withholding is a prepayment, not final tax liability. Other income, a move during the year, remote work and separate local taxes or credits can change the result.

Wage-exemption conditions: An eligible IN resident who remains a Kentucky nonresident can claim the covered employee-wage exemption using the 2026 Kentucky K-4, reciprocal-state worksheet and box 4. Give the completed certificate to the Kentucky employer and keep a copy. Local occupational tax can still apply; check the actual workplace.

This pair's wage-exemption or credit guidance checked 2026-11-02. Individual return calculations and other source dates are separate.

I live inI work inAnnual wages ($)Filing status

State income tax: $4,554 a year

Modeled annual state income tax for living in Indiana and working in Kentucky: about $4,554 on $100,000 of wages.

Limits of this estimate:

Indiana's county component uses an illustrative 1.65% average, not your actual January 1 residence-county rate; local credits are not calculated.

Reciprocity agreement: covered employee wages are subject to state income tax only in your home state. Give your employer the work state's exemption form and arrange home-state withholding. County and city taxes require a separate check.

Conditions for this pair: An eligible IN resident who remains a Kentucky nonresident can claim the covered employee-wage exemption using the 2026 Kentucky K-4, reciprocal-state worksheet and box 4. Give the completed certificate to the Kentucky employer and keep a copy. Local occupational tax can still apply; check the actual workplace.

Official guidance (revenue.ky.gov) (opens in new tab) · Official guidance (apps.legislature.ky.gov) (opens in new tab)

Tax guide and official sources: live in Indiana, work in Kentucky

Official agency starting points: Indiana tax agency (opens in new tab) · Kentucky tax agency (opens in new tab). These directory links identify the selected states' agencies, not your filing obligations. Check their individual-tax guidance and forms for the year you are filing.

Tax to Kentucky

nonresident

Tax to Indiana

$4,554

resident

Total state tax

$4,554

Typical state returns

This is the usual filing pattern, not a determination that you must file. Filing thresholds, age or dependent status, other income and withholding refunds can change which returns you need.

How this $100,000 estimate adds up

These steps follow the selected home, work state, salary and filing status. They reconcile the model's annual liability, not the amounts withheld from your paycheck.

Modeled state income tax for Indiana residence and Kentucky work
Step	Kentucky work state	Indiana home state
Tax before the modeled other-state credit	$0	$4,554
Modeled other-state credit subtracted	$0	$0
Tax after that credit	$0	$4,554

Total: $0 + $4,554 = $4,554 a year. Amounts are rounded for display. Work-state wage exemptions, when applicable, are already reflected in the first row; they are not an other-state credit.

No other-state credit is subtracted in this selected scenario. Included county components stay in these amounts; excluded local taxes and credits stay excluded. Federal income tax, payroll programs and refund eligibility are outside this reconciliation.

State tax at different salaries

Wages	To KY	To IN	Modeled total	If you worked in IN
$50,000	$0	$2,254	$2,254	$2,254
$75,000	$0	$3,404	$3,404	$3,404
$100,000	$0	$4,554	$4,554	$4,554
$150,000	$0	$6,854	$6,854	$6,854
$250,000	$0	$11,454	$11,454	$11,454

Single filer, all wages earned in Kentucky, 2026 state tax rules, standard deductions. State income tax includes Indiana's average county income tax. Other local income taxes are not included.

From paycheck withholding to your returns

Withholding: If eligible, complete the reciprocal-state worksheet and box 4 of Kentucky Form K-4 (42A804, 2026, revision 12/2025) and provide it to the Kentucky employer, who retains it. Ask payroll about Indiana state and resident-county withholding; check Indiana estimated payments if necessary. The daily-commute restriction described in Kentucky law and the K-4 is for Virginia residents, not Indiana residents. Kentucky occupational withholding is a separate question.
Returns: File the Indiana resident IT-40 and county schedule when required. A qualifying full-year reciprocal resident with Kentucky wages only who had Kentucky state income tax withheld may use the appropriate-year Kentucky 740-NP-R refund procedure. The 2025 edition requires Schedule KW-2 and a copy of the home-state return; if both spouses qualify, each files separately. Other Kentucky-source income, part-year residence or state-specific thresholds can require a different return. Do not include Kentucky local withholding as Kentucky state withholding.
Credit or refund: Do not use refundable Kentucky state wage withholding as an Indiana state tax credit: recover it from Kentucky. Indiana’s local tax credit for qualifying income taxes paid to another state’s locality is a separate county-tax calculation, capped under the local-credit worksheet and the income and tax limits; keep evidence of local tax paid. The calculator does not apply that credit.

Worked example: $100,000 of wages

Single filer, full-year resident of Indiana, all work performed in Kentucky, no other income, standard deductions and modeled personal exemptions. Covered wages are exempt from Kentucky state income tax under wage reciprocity. Pay a modeled $4,554 to Indiana, total $4,554. This exemption is not an other-state tax credit.

Annual liability, not paycheck withholding or a refund estimate. Federal tax, payroll programs, other local taxes, special credits and part-year residency are excluded. State income tax includes Indiana's average county income tax. Other local income taxes are not included.

Remote-work and local exceptions

Full-year Indiana resident with ordinary W-2 wages and all workdays physically in Kentucky. A Kentucky abode or residence change, remote work or other income needs a separate review. The calculator does not allocate hybrid workdays or verify local-tax credit eligibility.

Clark County, Indiana home; Louisville workplace

For a resident of Clark County working within Louisville/Jefferson County, check the actual Indiana county and Louisville occupational withholding on pay statements. Kentucky state wage reciprocity does not eliminate local occupational tax. Indiana’s possible out-of-state local-income-tax credit is separately limited; it is not included in this illustration.

Official forms and instructions

Source audit 2026-11-02. Use the return and instructions for the year you are filing; a current-forms link may still show a prior-year return. Official sources checked; not independently reviewed.

Check your payslip and keep these records

Compare the payroll certificate you supplied with the state withholding on your next payslip. Check city, county and school-district entries separately; a state exemption does not settle local tax.
Keep your W-2 and other withholding statements, copies of payroll certificates, filed state and local returns, and proof of tax paid. A refund depends on actual withholding and the completed return, not this annual estimate.
Keep an actual work-location log, including home-working days. This calculator assumes ordinary employee wages, full-year residence in Indiana and every workday physically in Kentucky.
If you moved during the year, have nonwage income or do not meet that scope, follow the pair's remote and local exceptions and the moving-year tax guide before using the amount as your own result. This tool does not calculate hybrid allocation, local credits or a personal refund.

What to do

Keep a record of the days you work in each state, especially if you sometimes work from home.

Local income taxes

Indiana: Every Indiana county levies a local income tax. Indiana residents pay the rate of the county they live in on January 1. People who live in another state pay the tax of the Indiana county where they principally work on January 1, and that includes residents of reciprocity states (KY, MI, OH, PA, WI) who file Form WH-47: the reciprocity agreements cover only the state tax.
Kentucky: City/county occupational license taxes are levied by work location on residents and nonresidents alike (e.g., Louisville Metro ~2.2% combined, Lexington 2.25%), and are NOT covered by KY's state reciprocity agreements - OH/IN commuters into Louisville/Covington still pay them.

Special credit rules

IN: Indiana county tax is separate from state wage reciprocity and state-tax credits. Another state's state-tax credit does not offset Indiana county tax; any eligible credit for out-of-state local tax is separate and is not modeled.

Frequently asked questions

Do I pay Kentucky income tax if I live in Indiana?

If you qualify for the wage-reciprocity exemption, no Kentucky state income tax on covered employee wages: under reciprocity Indiana taxes them. City and county taxes require a separate check. An eligible IN resident who remains a Kentucky nonresident can claim the covered employee-wage exemption using the 2026 Kentucky K-4, reciprocal-state worksheet and box 4. Give the completed certificate to the Kentucky employer and keep a copy. Local occupational tax can still apply; check the actual workplace.

Do I have to file taxes in both Indiana and Kentucky?

File the Indiana resident IT-40 and county schedule when required. A qualifying full-year reciprocal resident with Kentucky wages only who had Kentucky state income tax withheld may use the appropriate-year Kentucky 740-NP-R refund procedure. The 2025 edition requires Schedule KW-2 and a copy of the home-state return; if both spouses qualify, each files separately. Other Kentucky-source income, part-year residence or state-specific thresholds can require a different return. Do not include Kentucky local withholding as Kentucky state withholding.

Will I be taxed twice?

Not at the state level on covered wages: under reciprocity Indiana taxes them, about $4,554 on $100,000 in this model. The estimate includes resident county tax where modeled; other local taxes or credits are separate.

Rules reviewed 2026-09-24 from state revenue departments and the Tax Foundation. Estimates only; confirm with each state's revenue department.