Live in Michigan, Work in Kentucky: Which State Taxes Your Paycheck?
Answer
Only your home state taxes these wages. Kentucky has agreed with Michigan not to tax Michigan residents on wages earned in Kentucky, so the answer is a single Michigan resident return — provided you actually hand Form 42A809 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 Michigan and Kentucky does not apply itself: an employer that never receives Form 42A809 keeps withholding.
Kentucky holds more reciprocal agreements than any other state — seven. A resident of Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia or Wisconsin gives Form 42A809, Certificate of Nonresidence, to the Kentucky employer. The Virginia agreement covers daily commuters only.
The certificate goes to your employer's payroll department, not to Kentucky Department of Revenue, and it is not retroactive — filing it in June does not recover Kentucky tax withheld in January. That money comes back only by filing a Kentucky nonresident return for the year and claiming a refund.
Kentucky also has a layer below the state one, and it is the layer that survives every agreement: Kentucky cities, counties and school districts levy occupational licence taxes on wages earned in their jurisdiction. Reciprocity does not reach them, and the home state's credit generally does not either — a reciprocal-state resident working in Kentucky still pays the local tax.
What you file
- 1Give to your employer · KentuckyForm 42A809
Give your employer Form 42A809 so Kentucky stops withholding. This goes to the employer, not to Kentucky Department of Revenue — and it is not retroactive, so file it before the first paycheck of the year.
- 2Resident return · Michigan
File a Michigan resident return reporting all of your income, including the wages earned in Kentucky.
The two states, side by side
| Michigan | Kentucky | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — flat |
| Reciprocity partners | 6 (Form MI-W4) | 7 (Form 42A809) |
| Convenience rule | No | No |
| Nonresident return | Form MI-1040 with Schedule NR | Form 740-NP |
| Credit for other-state tax | Form MI-1040 (credit for income tax imposed by another state) | Schedule ITC |
| Nonresident safe harbour | None published | None published |
| Local income tax | Yes | Yes |
| Revenue department | Michigan Department of Treasury | Kentucky Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Kentucky and working in Michigan 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: Michigan → KentuckyHome state only
- 1099 contractor: Michigan → KentuckyHome state, plus the client state if you work there
- Moved mid-year: Michigan → KentuckyTwo part-year returns
Other Michigan pairs
Questions people actually ask
I live in Michigan and work in Kentucky. Which state takes the tax out of my paycheck?
Only your home state taxes these wages. Kentucky has agreed with Michigan not to tax Michigan residents on wages earned in Kentucky, so the answer is a single Michigan resident return — provided you actually hand Form 42A809 to your employer, because the exemption is not automatic.
Which state should my employer be withholding for?
Michigan. Your employer should withhold Michigan tax rather than Kentucky tax on these wages, but only once you have given payroll Form 42A809 — the exemption is not automatic and it does not apply retroactively. If a Kentucky line is showing on your pay stub, raise it with payroll now rather than at filing time.
What if Kentucky tax was already withheld from my pay?
File Form 42A809 with your employer to stop it going forward, then recover what was already taken by filing a Kentucky nonresident return for that year and claiming a refund of the full amount. Michigan will still expect its own tax on the same wages, so do not treat the refund as a windfall.
How current is this?
The Michigan and Kentucky rules on this page were last checked against Michigan Department of Treasury and Kentucky 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.
- Michigan Department of Treasury — individual income taxaccessed 2026-08-07
- Kentucky Department of Revenue — individual income taxaccessed 2026-08-07