Live in Tennessee, Work in Kentucky: Which State Taxes Your Paycheck?
Answer
One return, filed in Kentucky. Your employer withholds Kentucky tax on the wages you earn there and you settle up on a Kentucky nonresident return. Tennessee does not tax wages, so this pair produces a single state filing rather than two.
Last verified
This is the mirror image of the more common commute. There is no home-state return to file, so the Kentucky nonresident return carries the whole obligation — and because Tennessee charges nothing, there is no credit mechanism involved anywhere.
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 a Kentucky nonresident return for the wages you earned in Kentucky. Tennessee has no wage income tax, so there is no second return and no credit to claim.
The two states, side by side
| Tennessee | Kentucky | |
|---|---|---|
| Taxes wages | No | Yes — flat |
| Reciprocity partners | None | 7 (Form 42A809) |
| Convenience rule | No | No |
| Nonresident return | Not applicable | Form 740-NP |
| Credit for other-state tax | No income tax | Schedule ITC |
| Nonresident safe harbour | Not applicable | None published |
| Local income tax | No | Yes |
| Revenue department | Tennessee Department of Revenue | Kentucky Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Kentucky and working in Tennessee gives:Home state only.
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: Tennessee → KentuckyNo state income tax on your wages
- 1099 contractor: Tennessee → KentuckyClient state only, if you work there
- Moved mid-year: Tennessee → KentuckyOne part-year return — the state you moved to
Other Tennessee pairs
Questions people actually ask
I live in Tennessee and work in Kentucky. Which state takes the tax out of my paycheck?
One return, filed in Kentucky. Your employer withholds Kentucky tax on the wages you earn there and you settle up on a Kentucky nonresident return. Tennessee does not tax wages, so this pair produces a single state filing rather than two.
Which state should my employer be withholding for?
Kentucky. The wages are sourced to Kentucky, so Kentucky withholding is correct and there is no Tennessee withholding to set up, because Tennessee levies no income tax on wages.
How current is this?
The Tennessee and Kentucky rules on this page were last checked against Tennessee Department of Revenue 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.
- Tennessee Department of Revenue — individual income taxaccessed 2026-08-07
- Kentucky Department of Revenue — individual income taxaccessed 2026-08-07