KY-IN Tax Reciprocity 2026

KY-IN reciprocity covers the Louisville/Southern Indiana commuter corridor — a major daily commute of ~70,000.

Quick answer: Yes, active reciprocity. KY residents working in IN file WH-47 (covers both IN state AND county tax). IN residents working in KY file 42A809.

How It Works Both Directions

ScenarioForm To FileResult
Live KY, work INWH-47 (to skip IN)No IN withholding. Pay KY tax only.
Live IN, work KY42A809 (to skip KY)No KY withholding. Pay IN tax only.

Worked Example

Destiny lives in Louisville KY, works in Jeffersonville IN, earns $62,000. With reciprocity: files WH-47 with IN employer. IN withholds $0 state and $0 county. KY withholds ~$2,480 (4%). Louisville metro occupational tax 2.2% = $1,364 — applies to KY residents regardless. Total: ~$3,844.

Step-by-Step: Claim the Exemption

  1. Download the work-state exemption form (IN form WH-47 for KY-residents-working-in-IN; KY form 42A809 for IN-residents-working-in-KY).
  2. Fill in name, SSN, home address (must be in the reciprocity state), and current date.
  3. Submit to HR/payroll at your employer.
  4. Verify on your next paystub that work-state tax withholding is $0.
  5. Update your home-state W-4 to make sure you withhold enough for full income tax.
  6. File only a resident return in your home state next April (unless you have non-wage work-state income).

OBBBA 2026 Note

OBBBA 2026 (One Big Beautiful Bill Act) raised the federal SALT cap to $40,000. This matters for reciprocity commuters who itemize: your full home-state income tax is now more likely to be fully deductible on federal Schedule A, making the state-level tax difference between your home and work state a real after-tax driver of commute value. Check each state rate: KY top rate 4.0% flat (2026), IN top rate 2.9% flat + county (~1%).

FAQ

Does KY-IN reciprocity cover Indiana county income tax?

Yes. IN county tax IS covered for KY residents filing WH-47. Unusual among reciprocity agreements — IN county tax rides along state reciprocity.

Does reciprocity cover Louisville Metro occupational tax?

No. Louisville Metro’s 2.2% occupational license tax is a local tax applied to KY residents working anywhere. Not covered by any reciprocity agreement.

Which form does an Indiana resident working in Kentucky file?

File KY form 42A809 (Certificate of Nonresidence) with the KY employer. KY withholding stops.

Is KY’s 4.0% rate dropping in 2026?

KY flat rate is 4.0% for 2026. Further cuts to 3.5% are conditional on meeting 2025 revenue triggers — pending confirmation from KY DOR.

Do self-employed KY residents get reciprocity benefit in IN?

No. Reciprocity covers W-2 wages only. 1099/self-employment income earned from IN clients is IN-source income and requires a nonresident IT-40PNR return.

Model Your Take-Home

See exact post-reciprocity paycheck with KY or IN withholding.

Paycheck Calculator →
Other reciprocity pairs:
NJ-PA · VA-DC · MD-DC · MD-VA · MD-PA · PA-OH · Full matrix

Tax calculations are estimates for educational and informational purposes only. This site does not provide tax, legal, or financial advice. Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. Data sourced from IRS publications and official state tax authority websites.

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