You may qualify to take a credit for taxes paid to another state while a resident of Indiana. If the income was taxed in both Indiana and the other state, you are a resident of Indiana and you filed a tax return in the other state, you can take the credit. The program will automatically calculate the credit if you file a resident Indiana return and a nonresident return for the other state. Any entry you make into the program will override the automatic calculations.
If you were an Indiana resident during the current tax year and had income from another state, you can take a credit for the taxes withheld on the resident return. You should always check with the other state's rules concerning the taxation of your income.
Note: The program will automatically calculate the Credit for Taxes Paid to Another State for your Resident return if you have a Non-Resident return created on your account. If the other state return is a Part-Year return, you will be required to manually enter the income taxed by Indiana and the other state as well as the "total tax" on the other state return.
Reciprocal Agreement
Indiana has a reciprocal agreement with Kentucky, Pennsylvania, Michigan, Wisconsin, and Ohio. If you were an Indiana resident and had income from one of these states, you are covered by a reciprocal agreement.
Most of the time, employers in these other states will withhold Indiana taxes from your wages because of the reciprocal agreement. However, if the state withholdings are not for Indiana, you will have to file another claim for a refund from that state.
Reverse Credit
If you were an Indiana resident during the taxable year and had income from Arizona, Oregon or Washington DC, you must pay Indiana tax on all of your income. You will also need to file a nonresident return with the other state and claim a credit on their tax return for the Indiana tax paid. This is located under the Credit for Taxes Paid section of those returns.
No State Income Tax
If you were an Indiana resident during the taxable year and had income from Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, you are not allowed to claim this credit. These states do not have any income tax. You must file an Indiana resident return and pay Indiana tax on all your income.
To enter this credit within your account, follow the steps below:
- State Section
- Edit (pencil)
- Credits
- Credit for Taxes Paid to Another State
For additional information pertaining to Credit for Taxes Paid to Another State, please review the state instructions.
