KY and MI do not border each other, so this agreement mostly serves remote employees and auto-industry transfers between the two states.
| Scenario | Form To File | Result |
|---|---|---|
| Live KY, work MI | MI-W4 (to skip MI) | No MI withholding. Pay KY tax only. |
| Live MI, work KY | 42A809 (to skip KY) | No KY withholding. Pay MI tax only. |
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 3.5% flat (2026), MI top rate 4.25% flat.
Use the MI-W4 and claim the reciprocity exemption as a Kentucky resident. Michigan state withholding stops. If you physically work inside a Michigan city with a local income tax (Detroit, Grand Rapids, etc.), the city tax still applies.
File KY form 42A809 (Certificate of Nonresidence) with your Kentucky employer. KY state withholding stops - but KY city/county occupational license fees on wages earned in Kentucky still apply to nonresidents.
3.5% flat, down from 4.0%, after HB 1 (2025) revenue triggers were met. Michigan is 4.25% flat, so a KY resident on a MI payroll keeps an extra 0.75 points by routing withholding home - and skips the MI nonresident return.
File KY form 740-NP-R (Nonresident Reciprocal State return) to recover the full KY withholding for that year, then submit 42A809 to payroll so future paychecks withhold Michigan tax.
No. KY local occupational license fees (Louisville Metro 2.2%, Lexington-Fayette 2.25%, and hundreds of smaller cities/counties) tax wages earned within their boundaries regardless of residency or reciprocity.
See exact post-reciprocity paycheck with KY or MI withholding.
Paycheck Calculator →Run the numbers for each state: Kentucky Income Tax Calculator · Michigan Income Tax Calculator
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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