Live in North Dakota, Work in Kentucky: Which State Taxes Your Paycheck?
Answer
Expect withholding in Kentucky and a return in both. North Dakota and Kentucky hold no reciprocal agreement, so the overlap is resolved after the fact: Kentucky taxes the Kentucky-source wages, and your North Dakota resident return claims a credit for that tax against the North Dakota liability on the same income.
Last verified
Without an agreement between North Dakota and Kentucky, the overlap is handled after the fact rather than prevented. That is why the filing order matters: the Kentucky figure is an input to the North Dakota return, so completing North Dakota first means doing it twice.
A North Dakota resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule ND-1CR. The credit is capped at the North Dakota tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
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
- 1Nonresident return · KentuckyForm 740-NP
File the Kentucky nonresident return FIRST — you need the Kentucky tax figure before you can complete North Dakota.
- 2Resident return · North DakotaSchedule ND-1CR
File a North Dakota resident return reporting all income, then claim the credit for tax paid to Kentucky. The credit is capped at what North Dakota would have charged on that same income, so if Kentucky taxes it at a higher rate the difference is not refunded.
The two states, side by side
| North Dakota | Kentucky | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — flat |
| Reciprocity partners | 2 (Form NDW-R) | 7 (Form 42A809) |
| Convenience rule | No | No |
| Nonresident return | Form ND-1 with Schedule ND-1NR | Form 740-NP |
| Credit for other-state tax | Schedule ND-1CR | Schedule ITC |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | North Dakota Office of State Tax Commissioner | Kentucky Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Kentucky and working in North Dakota gives:Both states — credit offsets the double tax.
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: North Dakota → KentuckyHome state only
- 1099 contractor: North Dakota → KentuckyHome state, plus the client state if you work there
- Moved mid-year: North Dakota → KentuckyTwo part-year returns
Other North Dakota pairs
Questions people actually ask
I live in North Dakota and work in Kentucky. Which state takes the tax out of my paycheck?
Expect withholding in Kentucky and a return in both. North Dakota and Kentucky hold no reciprocal agreement, so the overlap is resolved after the fact: Kentucky taxes the Kentucky-source wages, and your North Dakota resident return claims a credit for that tax against the North Dakota liability on the same income.
Which state should my employer be withholding for?
Kentucky. The wages are sourced to Kentucky, so Kentucky withholding is correct and there is no North Dakota withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. North Dakota gives residents a credit for tax paid to Kentucky on the same income, claimed on Schedule ND-1CR. The credit is capped at the North Dakota tax on that income, so if Kentucky taxes it more heavily the excess is not refunded by either state.
How current is this?
The North Dakota and Kentucky rules on this page were last checked against North Dakota Office of State Tax Commissioner 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.
- North Dakota Office of State Tax Commissioner — individual income taxaccessed 2026-08-07
- Kentucky Department of Revenue — individual income taxaccessed 2026-08-07