Reciprocity state pair

Live in Kentucky, work in Indiana

Reciprocity agreement: Indiana doesn't tax your wages at the state level, so Kentucky taxes them. Indiana county income tax still applies (Form IT-40RNR). Give your employer Form WH-47 so it stops withholding Indiana state tax; it still withholds the county tax.

By Abu HasnatData reviewed Sep 25, 2026Data: Kentucky and Indiana revenue departments (methodology)

I live inI work inAnnual wages ($)Filing status

State income tax: $5,016 a year

Living in Kentucky and working in Indiana, you'd pay about $5,016 in state income tax on $100,000 of wages, $1,634 more than if you worked in Kentucky.

Tax to Indiana

$1,634

county tax only

Tax to Kentucky

$3,382

resident

Total state tax

$5,016

State returns to file

State tax at different salaries

Wages	To IN	To KY	Total	If you worked in KY
$50,000	$809	$1,632	$2,441	$1,632
$75,000	$1,221	$2,507	$3,728	$2,507
$100,000	$1,634	$3,382	$5,016	$3,382
$150,000	$2,459	$5,132	$7,591	$5,132
$250,000	$4,109	$8,632	$12,741	$8,632

Single filer, all wages earned in Indiana, 2026 state tax rules, standard deductions. State income tax includes Indiana's average county income tax, which reciprocity does not cover (Form IT-40RNR; no Kentucky credit for it is assumed). Other local income taxes are not included.

What to do

Reciprocity: KY residents working in IN exempt from IN state tax on wages; file Form WH-47 (Certificate of Residence).
Your employer still withholds Indiana county tax. File Indiana Form IT-40RNR each year to settle it, along with your Kentucky resident return.
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: Reverse-credit arrangements (notably AZ, CA, OR): IN nonresidents from those states claim credit on the IN nonresident return. Separately, IN county income tax is owed by nonresidents on IN-sourced wages (county of principal employment).

Frequently asked questions

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

No Indiana state income tax: under the reciprocity agreement Kentucky taxes your wages. Indiana county income tax still applies, though: about $1,634 on $100,000 at the average county rate, filed on Form IT-40RNR. KY residents working in IN exempt from IN state tax on wages; file Form WH-47 (Certificate of Residence).

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

Usually yes: Indiana's reciprocal nonresident return (Form IT-40RNR) for the county tax, and your resident return in Kentucky for the state tax on your wages.

Will I be taxed twice?

Not at the state level: under the reciprocity agreement only Kentucky taxes your wages. Indiana county tax still applies, so your total is about $5,016 on $100,000 ($3,382 to Kentucky and $1,634 in Indiana county tax).

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