Indiana / Kentucky tax reciprocity
Each pair below is taxed by the RESIDENCE state, not the work state — the work state agrees not to withhold. Figures are illustrative, on a $75,000 salary.
Who taxes you, and what to file
The certificate goes to your employer in the state you work in. Figures are state income tax on $75,000, single, no dependents.
| Work in | Live in | Certificate to file | Tax under reciprocity | If the work state taxed you |
|---|---|---|---|---|
| Indiana | Kentucky | WH-47 | $2,507 | $2,183 |
| Kentucky | Indiana | 42A809 | $2,183 | $2,507 |
The last column is hypothetical — what the work state would take with no agreement in place. It is not a second bill.
Does this cancel the local city or county tax?
Reciprocity is a state income tax concept. A local wage tax is a separate levy and can survive it.
- Working in Indiana
- Bulletin #33: "Indiana reciprocity agreements do not cover withholding requirements concerning Indiana Local Income Taxes... Employees who are residents of reciprocal states are subject to LIT in the same manner as residents of nonreciprocal states." The WH-47 form repeats the warning on its face.
- Working in Kentucky
- Kentucky local occupational license fees are not recoverable under reciprocity: Form 740-NP-R, the reciprocal-state refund return, instructs "Do not include local tax withheld." Kentucky publishes no explicit statement that local fees survive, so this rests on the refund return rather than a direct sentence.
Sources
- Indiana: Indiana Dept. of Revenue — Income Tax Information Bulletin #33 (December 2024) — https://www.in.gov/dor/files/ib33.pdf
- Kentucky: Kentucky Dept. of Revenue — 103 KAR 17:140, Individual income tax — reciprocity — nonresidents — https://revenue.ky.gov/Dor%20Training%20Materials/103%20KAR%2017.140.%20Individual%20income%20tax%20-%20reciprocity%20-%20nonresidents.pdf
Run your own Indiana / Kentucky numbers
Opens on work in Indiana, live in Kentucky. Change the salary, either state, or filing status below.
Indiana / Kentucky: common questions
Does Indiana tax Kentucky residents who work there?
No. Indiana does not withhold its state income tax from a Kentucky resident's wages under the reciprocity relationship in effect for 2026 — that income is taxed by Kentucky instead. File WH-47 with your Indiana employer to stop the withholding. Source: Indiana Dept. of Revenue — Income Tax Information Bulletin #33 (December 2024).
Does Kentucky tax Indiana residents who work there?
No. Kentucky does not withhold its state income tax from an Indiana resident's wages under the reciprocity relationship in effect for 2026 — that income is taxed by Indiana instead. File 42A809 with your Kentucky employer to stop the withholding. Source: Kentucky Dept. of Revenue — 103 KAR 17:140, Individual income tax — reciprocity — nonresidents.
Does reciprocity also cancel the local city or county tax?
Not necessarily — reciprocity is a state income tax concept, and a local wage tax is a separate levy that can survive it. Indiana: Bulletin #33: "Indiana reciprocity agreements do not cover withholding requirements concerning Indiana Local Income Taxes... Employees who are residents of reciprocal states are subject to LIT in the same manner as residents of nonreciprocal states." The WH-47 form repeats the warning on its face. Kentucky: Kentucky local occupational license fees are not recoverable under reciprocity: Form 740-NP-R, the reciprocal-state refund return, instructs "Do not include local tax withheld." Kentucky publishes no explicit statement that local fees survive, so this rests on the refund return rather than a direct sentence.
Does reciprocity cover self-employment or 1099 income?
No. Reciprocity covers employee compensation only, and the scope is set by each state's own materials rather than by a common rule — covers salaries, wages, tips and commissions only; other Indiana-source income remains taxable. Self-employment income, rental income, gambling winnings and pass-through income are outside it, and may still require a nonresident return in the work state.
Other pairs involving these states
See all 32 state reciprocity pairs →