Live in Kentucky, Work in Indiana: Which State Taxes Your Paycheck?
Answer
Only your home state taxes these wages. Indiana has agreed with Kentucky not to tax Kentucky residents on wages earned in Indiana, so the answer is a single Kentucky resident return — provided you actually hand Form WH-47 to your employer, because the exemption is not automatic.
Last verified
Reciprocity is the cleanest outcome in multi-state wage tax, and also the one most often missed, because it only works if you file the certificate. The agreement between Kentucky and Indiana does not apply itself: an employer that never receives Form WH-47 keeps withholding.
Indiana does not tax the wages of residents of Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin. The employee files Form WH-47, Certificate of Residence, with the Indiana employer.
The certificate goes to your employer's payroll department, not to Indiana Department of Revenue, and it is not retroactive — filing it in June does not recover Indiana tax withheld in January. That money comes back only by filing a Indiana nonresident return for the year and claiming a refund.
Indiana also has a layer below the state one, and it is the layer that survives every agreement: Every Indiana county levies its own income tax, and the reciprocal agreements do not cover it. A resident of a reciprocal state who works in Indiana still pays Indiana county tax on those wages.
What you file
- 1Give to your employer · IndianaForm WH-47
Give your employer Form WH-47 so Indiana stops withholding. This goes to the employer, not to Indiana Department of Revenue — and it is not retroactive, so file it before the first paycheck of the year.
- 2Resident return · Kentucky
File a Kentucky resident return reporting all of your income, including the wages earned in Indiana.
The two states, side by side
| Kentucky | Indiana | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — flat |
| Reciprocity partners | 7 (Form 42A809) | 5 (Form WH-47) |
| Convenience rule | No | No |
| Nonresident return | Form 740-NP | Form IT-40PNR |
| Credit for other-state tax | Schedule ITC | Schedule 6 (Form IT-40PNR) |
| Nonresident safe harbour | None published | None published |
| Local income tax | Yes | Yes |
| Revenue department | Kentucky Department of Revenue | Indiana Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Indiana and working in Kentucky gives:Reciprocal agreement — file the exemption form.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- Remote worker: Kentucky → IndianaHome state only
- 1099 contractor: Kentucky → IndianaHome state, plus the client state if you work there
- Moved mid-year: Kentucky → IndianaTwo part-year returns
Other Kentucky pairs
Questions people actually ask
I live in Kentucky and work in Indiana. Which state takes the tax out of my paycheck?
Only your home state taxes these wages. Indiana has agreed with Kentucky not to tax Kentucky residents on wages earned in Indiana, so the answer is a single Kentucky resident return — provided you actually hand Form WH-47 to your employer, because the exemption is not automatic.
Which state should my employer be withholding for?
Kentucky. Your employer should withhold Kentucky tax rather than Indiana tax on these wages, but only once you have given payroll Form WH-47 — the exemption is not automatic and it does not apply retroactively. If a Indiana line is showing on your pay stub, raise it with payroll now rather than at filing time.
What if Indiana tax was already withheld from my pay?
File Form WH-47 with your employer to stop it going forward, then recover what was already taken by filing a Indiana nonresident return for that year and claiming a refund of the full amount. Kentucky will still expect its own tax on the same wages, so do not treat the refund as a windfall.
How current is this?
The Kentucky and Indiana rules on this page were last checked against Kentucky Department of Revenue and Indiana Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Kentucky Department of Revenue — individual income taxaccessed 2026-08-07
- Indiana Department of Revenue — individual income taxaccessed 2026-08-07