Which States does Indiana have a Reciprocal Agreement with?

If you're an Indiana resident and worked in Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin, Indiana has a reciprocal tax agreement with these states.

This means that wages, salaries, tips, and commissions earned in those states are generally taxed only by Indiana, not by the state where you worked.

What Income Qualifies?

The reciprocal agreement applies only to:

• Wages
• Salaries
• Tips
• Commissions

It does not apply to other types of income, such as:

• Self-employment income
• Business income
• Farm income
• Rental income
• Gambling winnings (including Indiana riverboat and lottery winnings)

If you have income other than wages, salaries, tips, or commissions from a reciprocal state, different tax rules may apply.

States Covered by Indiana's Reciprocal Agreements

Indiana has reciprocal agreements with:

• Kentucky (KY)
• Michigan (MI)
• Ohio (OH)
• Pennsylvania (PA)
• Wisconsin (WI)

If You Are an Indiana Resident Who Worked in a Reciprocal State

You should:

1. Report your wages on your Indiana resident return.
2. Pay tax to Indiana on those wages.
3. File a nonresident return with the other state if state taxes were withheld there and you need to request a refund.

Important

If the other state withheld tax from your paycheck, you cannot claim a credit on your Indiana return for those taxes. Instead, you must request a refund directly from the other state.

Removing the Automatic Credit for Taxes Paid to Another State

Our program may automatically calculate a credit for taxes paid to another state when you add a nonresident return.

If your income qualifies for a reciprocal agreement, you'll need to update your Indiana return:

1. Go to State Section.
2. Open your Indiana Resident Return.
3. Select County Information.
4. In the top section, choose your state of residence.
5. Click Save.
6. Continue to Out-of-State Income.
7. Enter:
   • The amount of wages earned in the reciprocal state.
   • The state where the wages were earned.

This information is used for reporting purposes and helps ensure the reciprocal agreement is applied correctly.

State-Specific Filing Instructions

Kentucky

If Kentucky tax was withheld:

1. Go to State Section > Kentucky Nonresident Return > Basic Information.
2. Complete the Residency Information section.
3. Indicate that you are a resident of a reciprocal state (Indiana).
4. Complete Form 740-NP-R for each spouse, if filing jointly.

To stop Kentucky withholding in the future, submit Form 42A809 to your employer.

Michigan

If Michigan tax was withheld:

1. Go to State Section > Michigan Nonresident Return.
2. Locate Residents of Reciprocal States.
3. Enter the Michigan wages earned while an Indiana resident as a negative amount.

To claim exemption from future Michigan withholding, give Form MI-W4 to your employer.

Ohio

If Ohio tax was withheld:

1. Go to State Section > Ohio Nonresident Return.
2. Select Subtractions From Income.
3. Choose Employee Compensation Earned in Ohio by Residents of Neighboring States.
4. Enter the Ohio wages as a positive amount.
5. Return to the menu and complete Form IT-NRS (Affidavit of Non-Ohio Residency).
6. Enter your Indiana residence information when prompted.

To avoid future Ohio withholding, provide Form IT-4NR to your employer.  

Pennsylvania

If Pennsylvania tax was withheld:

1. Go to State Section > Pennsylvania Return.
2. Select Adjustments to Income.
3. Complete the Reciprocal State Wage Adjustment section.

Additional Pennsylvania Requirement

Pennsylvania may require supporting documentation. You may need to mail:

• A copy of your Pennsylvania return
• A copy of your Indiana return
• Your W-2 showing Pennsylvania wages
• A statement explaining that you are an Indiana resident covered by a reciprocal agreement

To stop future Pennsylvania withholding, submit Form REV-419 to your employer.

Wisconsin

If Wisconsin tax was withheld:

1. Go to State Section > Wisconsin Nonresident Return > Basic Information.
2. Select Indiana as your resident state.
3. Complete the Legal Residence Questionnaire.
4. Follow the residency questions as directed by the program.

If needed:

1. Go to Federal > Income > W-2.
2. Edit the W-2 that reports Wisconsin wages.
3. Remove the amount shown in Box 16 for Wisconsin wages.
4. Save your changes.

To claim exemption from future Wisconsin withholding, submit Form W-220 to your employer.

Full-Year Residents of Reciprocal States Working in Indiana

If you were a full-year resident of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin and your only Indiana income was wages, salaries, tips, or commissions, file Indiana Form IT-40RNR (Reciprocal Nonresident Return).

Use Form IT-40PNR instead if:

• You were a part-year Indiana resident, or
• You had other Indiana-source income, such as business, rental, farm, or investment income.

Estimated Tax Reminder

If your employer in a reciprocal state did not withhold Indiana tax, or did not withhold enough, you may need to make Indiana estimated tax payments during the year to avoid penalties.

Special Notice for Perry County Residents

If you were a Perry County, Indiana resident and worked in Kentucky counties such as Breckinridge, Hancock, or Meade, special local tax reporting rules may apply. Review the Indiana IT-40 instructions carefully if local Kentucky taxes were withheld.