Live in Kentucky but work in Clark County, Indiana. We pay local taxes only. Do we need to file an Indiana return?

Forum|Forum|4 years ago
April 9, 2022
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TurboTax Live Self Employed

Hal_Al

Employee

Q. Do we need to file an Indiana return?

A. No.

The reciprocity agreement between IN & KY does not apply to local city or county taxes. You are not required to file a county return (part of the IN state forms), but you are also not entitled to a refund of the county withholding (box19 on your W-2), unless there was an error in the amount. If you are subject to a KY county or city tax, you should check to see if the KY city will give you a credit for the IN county tax withheld. KY does allow an itemized deduction (Schedule A) for local tax paid, on the state return.

TomD8

Employee

Be aware that @Hal_Al 's answer applies only to salary or wage (W-2) income. if you have any other kind of IN-source income (for example, rental income from a property located in IN), you'd have to file a non-resident IN return.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Hal_Al

Employee

@TomD8

Correct, the state reciprocal agreement only applies to W-2 wages. I assumed that "We pay local taxes only" meant that there was local withholding in box 19 of poster's W-2.